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The evolution of property right institutions and their consequence on investment decisions are central issues in the political economy of development. Effective and well‐defined property rights are deemed essential in providing the preconditions for economic growth. The importance of property right arrangements stems from the fact that they impact and alter the distribution of income. Economists are, therefore, in agreement that market transactions are more efficient when property rights are enforced. According to North and Thomas (1973), observed variations in economic performance across countries were related to the presence (or absence, for that matter) of property right institutions. Recently, Beseley (1995), and Feder and Feeny (1991), have argued that economic development and well‐established property right institutions are positively correlated. Meanwhile, there are two arguments in the literature in favour of establishing property rights institutions. First, assigning ownership of valuable assets and designating the parties bearing the rewards and costs is expected to strengthen market forces. In particular, the private control over assets and the ability to reap the rewards from exploiting these assets create incentives for investment and production. Second, enforcing contractual agreements is expected to provide economic agents with the incentives to use resources effectively and efficiently. When property rights are poorly defined, contracts become hard to enforce and fraud and corruption go unpunished. Bureaucrats responsible for formulating government policies will use their positions to influence the allocation of resources whereby, business managers find themselves forced to buy favours. The need to pay substantial bribes will, therefore, reduce the entrepreneur's incentives to invest and impose a significant burden on economic growth. Empirical evidence based on cross‐country comparisons does indeed suggest that corruption has large, adverse effects on private investment and economic growth. Mauro (1996) showed that when a country improves its standing on the corruption index, say, from 6 to 8 (0 being the most corrupt, 10 the least) it will experience a 4 percentage point increase in its investment rate and a 0.5 percentage point increase in its annual per capita GDP growth rate. These large effects suggest that policies that establish institutions to curb corruption could have significant payoffs. Political corruption will also undercut the government's ability to raise revenues from issuing licenses and permits, and lead to ever‐higher tax rates being levied on fewer and fewer taxpayers. This, in turn, reduces the government's ability to provide essential public goods, including the rule of law. When institutions are weak, bribes can alter outcomes of the legal and regulatory process by inducing the government either to fail to stop illegal activities (such as drug dealing or pollution) or unduly favour one party over another in court cases or other legal proceedings. Furthermore, theoretical and empirical studies have shown that corruption and political control usually raise transaction costs, uncertainty, and are associated with free‐rider problems. These costs will, therefore, constitute a dead‐weight loss to the society. Unless political and economic reforms are made, these inefficiencies will certainly hamper growth and development.

The purpose of this paper is to attest whether generalized trust variable is the best proxy for social capital in explaining the latter’s effect on economic growth in a panel setting. Via a specially formulated theoretical framework, the authors also test whether the growth-effect of social capital is direct or indirect, and if it is indirect, can property rights be the link between social capital and growth.

The authors begin with testing the robustness of generalized trust variable in explaining the effect of social capital on growth and property rights. The authors then propose a number of trust-alternative variables that are shown to contain an element of trust based on theoretical arguments drawn from previous studies, to proxy for social capital and re-estimate its effect on growth and property rights. In this study, the authors use panel estimation technique, hitherto has been limited in social capital studies, which are capable of reducing omitted variable bias and time-invariant heterogeneity compared to the commonly used cross-sectional estimation.

First, the authors find that generalized trust data obtained by the World Value Survey (WVS) are unable to yield sufficiently robust results in panel estimation due to missing observations problem. Using the proposed trust-alternative variables, the estimation results improve significantly and the authors are able to show that social capital is a deep determinant of growth and it is affecting growth via property rights channel. The findings also give supporting evidence to the primacy of informal rules and constraints as proposed by North (2005) over the political prominence theory by Acemoglu et al. (2005).

Generalized trust data obtained from the WVS, frequently used in majority of social capital studies to measure social capital, yield highly non-robust results in panel estimation due to missing observations problem. Future studies in social capital intending to use panel estimation therefore need to find trust-alternative variables to proxy for social capital, and this paper has proposed four such variables.

The use of panel estimation technique extends the evidence of social capital significance to economic growth and property rights, since the previous social capital studies rely heavily on cross-sectional estimation technique. Due to the availability of annual observations of the trust-alternative variables, this paper is able to find better results as compared to estimation using generalized trust data.

The purpose of this study is to identify the impact of legal institutions and property rights protection on corporate innovation among developing countries.

To testify these hypotheses, we use firm-level data from the World Bank Enterprise Survey, and country-level information from Worldwide Governance Indicators, World Development Indicators and Global Competitiveness Reports. The final data set consists of 24,166 firm observations, from 41 developing countries.

By using a wide range of control variables, the results propose that well-organized legal institutions stimulate corporate innovation . More precisely, a strong rule of law, effective government and protected property rights encourage firm-level innovation. Countries’ rule of law guarantees to solve disputes between parties and provide legitimate rights in case of innovation replication. Rule of law also directs that rules made by policymakers to secure the rights of innovators are well enforced. Moreover, strong property rights ensure innovators that the innovations are protected, and in case of any infringement, the guilty party will be punished and fined.

This study aims to investigate the role of all effective aspects legal institutions and property rights protection on corporate innovation among developing countries. Such security to prevent unlawful duplication will ultimately increase innovation.

Interfirm contracts are a ubiquitous economic institution in market economies. In this study, we examine the determinants of one important aspect of interfirm contracts – contract duration. We begin with Joskow's (1987) study that demonstrated that contract duration is governed by mechanisms that economize transaction costs. Our study extends Joskow's study in several ways: First, while Joskow's study focuses on one particular area of extreme resource dependence, between the coal mine and the power company, we examine patterns of contract duration and their determinants across broader economic sectors, thereby providing a more general test of the key ideas in transaction cost economics. Second, we investigate the role of social institutions as a distinct mechanism underlying the design of contract duration, especially in terms of mitigating risks and transaction costs. Finally, by situating our study in China, we extend the research context beyond industrialized market societies to a transitional economy where interfirm contracts are an emerging economic institution. The empirical study is based on the analyses of information on 877 contracts from 620 firms collected in two Chinese cities, Beijing and Guangzhou, in 2000.

The paper provides a detailed historical account of Douglass C. North's early intellectual contributions and analytical developments in pursuing a Grand Theory for why some countries are rich and others poor.

The author approaches the discussion using a theoretical and historical reconstruction based on published and unpublished materials.

The systematic, continuous and profound attempt to answer the Smithian social coordination problem shaped North's journey from being a young serious Marxist to becoming one of the founders of New Institutional Economics. In the process, he was converted in the early 1950s into a rigid neoclassical economist, being one of the leaders in promoting New Economic History. The success of the cliometric revolution exposed the frailties of the movement itself, namely, the limitations of neoclassical economic theory to explain economic growth and social change. Incorporating transaction costs, the institutional framework in which property rights and contracts are measured, defined and enforced assumes a prominent role in explaining economic performance.

In the early 1970s, North adopted a naive theory of institutions and property rights still grounded in neoclassical assumptions. Institutional and organizational analysis is modeled as a social maximizing efficient equilibrium outcome. However, the increasing tension between the neoclassical theoretical apparatus and its failure to account for contrasting political and institutional structures, diverging economic paths and social change propelled the modification of its assumptions and progressive conceptual innovation. In the later 1970s and early 1980s, North abandoned the efficiency view and gradually became more critical of the objective rationality postulate. In this intellectual movement, North's avant-garde research program contributed significantly to the creation of New Institutional Economics.

After the precipitated decline of the Soviet Empire and its satellite states, a system change seemed to be called for, and many countries embarked on social and political reforms focussing on property structures in the economy. This raised the issue of governance in the institutions that would constitute the structures in which production would have to take place. In particular, some Central European countries opted for mass privatisations of the means of production, on the face of it so as to have the people participate in the wealth of the nation. In fact, the wealth of the nation depends on the structures in which it is constituted. Dissipation of property rights will reduce the value of the nation's productive capital, whereas an intelligent structure that creates good governance structures at the same time, increases the value of the producing capital. This relatively simple insight lies at the heart of our understanding of how to analyse different processes of mass privatisation. This essay develops a theoretical framework by which different governance structures can be analysed. The framework consists of a blend of the economic theory of property rights, new institutional economics and Austrian economic theory.

This study aims to examine how property rights, financial liberalization and the control of corruption at the country level influence the inward and outward global engagement of domestic firms from developing countries. The author also examines whether firms with certain resource endowments such as human capital or technological capabilities are better positioned to globalize as the aforementioned institutional factors evolve.

Using a sample of 18,365 firms from 57 developing countries and multilevel modeling, the author shows that institutional factors are related to inward and outward global engagement.

The author finds that firms with human capital are more likely to move outward in the presence of lower levels of corruption. Domestic firms possessing technological capabilities are more likely to engage inward as financial liberalization eases the access to capital.

Many existing studies that have investigated the impact of institutional factors on internationalization by developing country firms have bundled different institutions together therefore sacrificing a focus on the effect of specific institutions on these firm decisions. While the author knows that institutions matter for developing country firm globalization, there is limited research on which institutions matter. There is also a debate on how institutions matter for developing country firms. The study sheds light on these aspects. The author also uses hierarchical linear modelling and uses both country- and firm-level variables.

As electronic commerce expands, credible property rights in key sectors are necessary. This article identifies three layers of an electronic commerce network – infrastructure, commercial services, and trust – and then outlines five conditions of property rights that are being fulfilled in varying degrees in the developed and developing worlds. The main challenge for the developing world is to concentrate on adequate infrastructural provision. The challenge for the developed world is in determining appropriate property rights for the supportive commercial services needed for electronic commerce as well as issues of consumer and business trust. Given the global nature of electronic commercial transactions, both developed and developing countries are involved in framing rules at the global level that resonate and are credible with domestic conditions and institutions.

This paper examines whether firms choose to source from multinational (MNC) suppliers instead of local suppliers as a means of overcoming weak contract enforcement institutions and as a means of accessing supply chain management capabilities. It uses a unique dataset of international contract manufacturing orders constituting the global supply chains of many of the world’s largest brands in footwear, sportswear, and apparel. It finds strong evidence that buyers are more likely to source from MNC suppliers in countries where contract enforcement is weak and when they have less experience sourcing from a given country. Further, it finds evidence that buyers are more likely to source from MNC suppliers when they source a wider variety of products, have smaller supplier networks, or have smaller order volumes.

The market is a complex organism that has rich implications and essential stipulations. From the property right perspective, the market is a series of property rights, rules, and system arrangements (an aggregation of rights), which are constructed, owned, operated, and managed by the state and from which the government can benefit. The market property right is owned by the government (state). The costs of market property right include tangible (explicit) cost, system cost, human cost, and other cost components. The study on the cost components of market property right is conducive to establishing the principle of matching investment with ownership, matching investment with income, and integrating (unifying) cost with efficiency.