One of the most important characteristics of a transaction is the nature of the investments made by the parties to the transaction. When you buy bread from a baker, neither party is making an investment for just that very specific transaction. The baker invests in the bakery equipment, however, he supplies bread not only to you, but to a large number of customers, and if you refuse to buy bread from him, then your decision will not affect the value of the investment in the bakery equipment. However, if you are stamping parts for a specific brand of vehicle under contract with a major auto company, your investment in that unique stamping equipment will be worthless if that company calls it quits. These investments are called specific because they lose most of their value outside of that specific transaction. If this equipment is used for other purposes, much of its value will be lost.
The concept of resource specificity was first introduced into economic theory by the American economist, 1992 Nobel Prize winner G. Becker in 1964 in relation to investments in human capital. Becker noted that some knowledge and skills have a higher value in a given employment relationship compared to other employment relationships. These specialized knowledge and skills can improve productivity, but they introduce complexity into simple models of wages, investment in training, and other terms of employment relationships.
If a resource is of interest to many producers and its market value depends little on where it is used, then it is a general-purpose resource. A specific resource is one that, in the event of a deal being interrupted, cannot be used in other projects without compromising its economic value. The degree of specificity of a resource can be judged by how much the value of the resource will be reduced when it is used elsewhere. At the same time, the value of the investment itself does not play a role: assets with a value of 10 million or 100 million dollars can be specific; the only important thing is that their value within the framework of a given transaction is higher than outside it.
Several types of resource specificity have been described in the literature. The first four types of specificity were identified by Williamson. Later he added one more type of specificity to them (it is sixth in our list).
- 1. Location specificity (site specificity) is associated with too high costs of moving the resource. Location specificity can be assumed if the enterprises are located in geographic proximity to each other, for example, a power plant was built in close geographic proximity to a coal mine. This arrangement allows saving on transportation costs and costs associated with storing coal reserves. After the initial placement of assets, the parties will maintain a bilateral relationship throughout the life of the power plant. Steel foundries and rolling mills are also built in close proximity to each other. Here, savings are achieved due to the absence of the need to heat the steel.
- 2. Specificity of physical assets (physical asset specificity). Specificity of physical capital is said to occur when the parties or one of the parties have invested in equipment with certain characteristics that have less value when used in other projects. An example is the furnaces of power plants, which are usually designed for a certain type of coal (with a certain moisture content, sulfur content, chemical composition). Deviation from the type of coal for which this equipment is designed, due to a breakdown in relations with its supplier, will require complex work to re-adjust the furnace, which is associated with significant resource costs.
- 3. Specificity of human capital (human asset specificity). Human capital specificity refers to when, through on-the-job training, workers acquire specialized skills that enable them to produce goods and services more efficiently than workers without specific human capital. An example of specific human capital is a manager's knowledge of the administrative features and management culture of the company in which he has worked for many years. This specific knowledge has value only for a given firm and is worthless if the manager loses his job in that firm, for example, as a result of a hostile takeover of the company he manages. The concept of human capital specificity can also refer to the relational skills that arise when working as a team when all team members know each other well.
- 4. Specificity of target or "intended" assets (dedicated assets specificity). Here we are talking about investments in general-purpose resources, which, however, may be intended for a single user. The supplier makes this investment in hopes of selling a significant amount of product to a specific customer. If the contract is terminated, the supplier is left with significant inventories, since there is no demand for them from other buyers. The same situation may arise on the buyer’s side, if he ordered a large quantity of products and did not receive it - he will not be able to find the same amount of product on the market.
- 5. Specificity temporary ( temporal specificity) . This is a characteristic of investments for which production coordination is essential. This type of specificity was first considered by the American economist, a prominent representative of neo-institutional theory, S. Masten and his co-authors when analyzing the costs of organizing naval shipbuilding in order to emphasize the central role of time and coordination in this type of activity. They drew attention to the fact that all participants in the production process in shipbuilding carried out activities within strict time frames, set by the need to coordinate actions at successive stages of production. Close coordination required complex contracts and increased contracting costs. "When on-time delivery is critical, delay becomes a potentially effective strategy for extorting price concessions. Knowing that a delay at one stage can affect the entire project, an opportunistic supplier may be tempted to take a larger share of the benefit of the exchange by threatening to withhold performance at last minute. The skills and assets required to complete the assignment may be simple enough, but the difficulty of finding and negotiating with another supplier who can provide a replacement on short notice creates the risk of extortion."
- 6. Specificity of reputation, torso brand (brand name specificity). This is a sunk investment in building a reputation or a brand that will lose its value if the company's goods or services turn out to be of poor quality.
It is customary to distinguish three main parameters of transactions, namely asset specificity, uncertainty and frequency.
A specific asset is created specifically for a specific transaction.
It cannot be used outside the scope of this transaction without significant losses in its productive potential.
For example: Oun language (New Guinea, 383 people), microcircuit, industrial building.
Specific assets are those costs, the next use of which is less profitable. It is customary to distinguish four types of asset specificity, namely location specificity, as well as physical, human and target assets. This typology is important because each type of asset specificity has its own most appropriate ways of organizing transactions.
Types of specificity:
- *Location - railway road, cannot be moved
- *Physical capital - related to technical capital. product parameters
- *Human capital is knowledge and profession that cannot be used for others. firms - nuclear physics, piano tuner
- *Target assets - to complete a specific order (stamps, molds)
- *An idiosyncratic (unique) asset - when used alternatively, it practically loses its value altogether.
Finally, we should point out such an extremely important phenomenon generated by the transactional specificity of assets as a fundamental transformation (O.I. Williamson’s term) when in the interaction of independent firms, instead of a market type of connection, a non-market partnership type of connection with long-term mutual dependence arises.
Structural uncertaintyThere are two types of uncertainty, namely structural (primary or natural) and behavioral (secondary), with structural uncertainty acting as a transaction parameter. Structural uncertainty is associated with the unknown about the circumstances that will accompany the transaction in the future. An example here is uncertainty regarding the dynamics of demand for products.
Frequency of transactions According to frequency, transactions are divided into one-time (not considered separately here), random and regularly repeated. The significance of this transaction parameter mainly stems from the fact that it determines the type of transaction management structures used, since in the case of regularly recurring transactions, the use of specialized management structures will be more economically justified. Consequently, expensive specialized governance structures are more likely to be used for regularly recurring transactions than for random transactions.
The concept of resource specificity was first introduced into economic theory by G. Becker in 1964 in relation to investments in human capital. A resource is called specific, which in the event of a deal interruption, it cannot be used in other projects without compromising its economic value. The degree of specificity of a resource can be judged by how much the value of the resource will be reduced when it is used elsewhere.
It is customary to highlight the following types of resource specificity.
· Location specificity, which means that the cost of moving a resource is too high. Location specificity can be assumed if enterprises are located in geographic proximity to each other.
· Physical asset specificity, which occurs when parties or one of the parties has invested in equipment with certain characteristics that has less value when used in other projects.
· Specificity of human capital, which assumes that as a result of on-the-job training, workers accumulate special skills that allow them to produce goods and services more efficiently than the same workers do, but do not have specific human capital.
· Specificity of targeted or “intended” assets, meaning investments in general purpose resources, which, however, may be intended for a single specific user.
· Time specificity, which is a characteristic of investments for which the coordination of production is essential (for example, in the production of perishable food products, the expiration date of which complicates the coordination of production; and the system of prompt delivery becomes a decisive factor).
· Specificity of reputation, trademark, reflecting sunk investments in their creation, which will lose their value if the company’s goods or services turn out to be of inadequate quality.
The attractiveness of investing in specific assets is to reduce production costs and thereby provide additional income. It is this additional income that arises when specific resources are combined that is called "quasi-rent", and is the target of opportunistic behavior. The partner of the party that has made a specific investment has the opportunity to “extort” a large part of the surplus created by a specific resource through the threat of termination of the transaction.
The concept " extortion“can be formulated as follows - this is a type of opportunistic behavior that arises after the conclusion of a transaction, the essence of which is the redistribution of quasi-rent, infringing on the interests of the party that made the specific investment. Extortion often takes the form of “subtle” opportunistic behavior that does not violate the terms of a formal contract.
Several examples of guarantees for specific investments used in business practice.
An investment in expensive, specialized sales capital that will lose value if the buyer defaults, such as the buyer's investment in building a large store. This is typically done in industries where uncertainty is low and market conditions do not change quickly.
Price restrictions, for example, the use of pricing conditions called “most favored nation treatment.” The buyer stipulates in the contract with each seller that if he renegotiates and pays that seller a higher price, then each seller of that buyer must receive that new price. In this case, each seller knows that it will be too costly for the buyer to succumb to this extortion attempt, and they will be less inclined to try to appropriate the quasi-rent. This contract provision creates a credible threat that the buyer will not renege on its contract option during negotiations.
A reciprocal exchange in which firm A buys good X from firm B, and firm B buys good Y from firm A. Mutual exchange automatically provides both parties with hostages; this mechanism is very effective, although it cannot always be applied.
Joint ventures. Two companies create a joint venture, which is hostage for both parties. But the use of this effective mechanism is also limited by the fact that the market must be deep enough to justify the creation of a new enterprise.
A guarantee of specific investments in the franchisor's brand can be price restrictions - the right to set minimum prices for dealers, which prevents a decrease in the quality of service as a result of the dealer setting lower prices for its goods.
One of the most important characteristics of a transaction is the nature of the investments made by the parties to the transaction.
The concept of resource specificity was first introduced into economic theory by G. Becker in 1964 in relation to investments in human capital.
If a resource is of interest to many producers and its market value depends little on where it is used, then it is general purpose resource.
Specific namesresource is available which, if the deal is interrupted, cannot be used in other projects without compromising its economic value.
The degree of specificity of a resource can be judged by how much the value of the resource will be reduced when it is used elsewhere.
It is customary to highlight the following types of resource specificity.
Location specificity(site specificity) is associated with too high costs of moving the resource. Location specificity can be assumed if enterprises are located in geographic proximity to each other.
An example of location specificity would be a power plant built in close geographic proximity to a coal mine.
This arrangement allows saving on transportation costs and costs associated with storing coal reserves.
Specificity of physical assets(physical asset specificity). Specificity of physical capital is said to occur when the parties or one of the parties have invested in equipment with certain characteristics that have less value when used in other projects.
An example is furnaces and power plants, which are usually designed for a certain type of coal (with a certain humidity, sulfur content, chemical composition).
3. Specificity of human capital(human asset specificity).
The specificity of human capital is said to exist when, as a result of on-the-job training, workers accumulate special skills that allow them to produce goods and services more efficiently than similar workers who do not have specific human capital do.
An example of specific human capital is a manager's knowledge of the administrative features and management culture of the company in which he has worked for many years.
This specific knowledge has value only for a given firm and is worthless if the manager loses his job in that firm, for example as a result of a hostile takeover of the company he manages.
The concept of human capital specificity can also refer to the relational skills that arise when working as a team when all team members know each other well.
4. Specificity of target, or “intended” assets(dedicated assets).
Here we are talking about investments in general-purpose resources, which, however, may be intended for one single specific user.
The supplier makes this investment in hopes of selling a significant amount of product to a specific customer.
If the contract is terminated, the supplier is left with significant inventory because there is no demand for it from other buyers.
The same situation may arise on the buyer's side.
5. Specificity is temporary(temporal specificity).
This is a characteristic of investments where coordination of production is essential (for example, in the production of perishable food products, the expiration date of which makes it difficult to coordinate production), and the system of prompt delivery becomes a decisive factor.
The value of resources not delivered on time is significantly reduced.
Specificity of reputation, brand(brand name specificity).
This is a sunk investment in building a reputation or a brand that will lose its value if the company's goods or services turn out to be of poor quality.
An economic agent that has invested in specific assets finds itself in a vulnerable position.
Outside of this transaction, specific investments lose their value; for other economic agents they do not represent the same value.
If the transaction is not executed, then the party that made the specific investment loses its investment.
In such a situation, when the party that has made a specific investment finds itself “locked” into a transaction with its partner, there is a danger of opportunistic behavior on the part of this partner, which is called “hold-up”.
Such dependence is often two-sided.
Before the transaction is concluded, the economic agent is faced with a large number of sellers and has the opportunity to choose, but after the conclusion of the contract, the competitive relationship is replaced by a bilateral monopoly relationship if investments are made in transaction-specific investments in physical or human assets.
What O. Williamson called a “fundamental transformation” is taking place.
The attractiveness of investing in specific assets is that they can lead to lower production costs and thereby provide additional income.
It is this additional income, which arises from the pooling of specific resources and is called “quasi-rent,” that is the goal of opportunistic behavior.
The partner of the party that has made a specific investment has the opportunity to “extort” a large part of the surplus created by a specific resource through the threat of termination of the transaction.
So, now we can formulate the concept "extortion" as follows: this is a type of opportunistic behavior that arises after the conclusion of a transaction, the essence of which is the redistribution of quasi-rent, infringing on the interests of the party that made the specific investment.
Extortion often takes the form of “subtle” opportunistic behavior that does not violate the terms of a formal contract.
When combining interspecific resources, i.e. specialized complementary, mutually unique resources in relation to each other, the maximum value of which is achieved only in a given company, a super-total effect arises, which is the source of quasi-rent.
This quasi-rent is divided among the owners of specific resources.
When an economic agent decides to enter an industry, he compares the income he will receive with the investments he needs to make. The portion of income that exceeds the minimum amount necessary to attract a firm to a given industry is rent.
Rent arises, as a rule, for a limited resource (and restrictions can be both natural and artificial).
However, once the investment has been made, returns may be lower than expected.
They may not even recoup the capital investments made by the economic agent.
Quasi-rent- this is the portion of income that exceeds the minimum amount necessary to keep the manufacturer in the industry.
Quasirenthat can be defined as follows: it is the difference between the income of a factor at its use in a given location and the income at its alternative best use.
An example here would be a steel mill located close to a power plant and making investments that depend on the plant being able to purchase energy at a certain price.
After making an investment that is sunk in nature, the utility may raise the price of energy and the steel mill will still operate because the marginal benefit, even at a higher energy price, will exceed the marginal cost, even though the sunk investment is will not pay off.
Rent is a surplus compared to average total costs.
Quasi-rent- surplus compared to average variable costs. In a competitive economy, rent is a transitory phenomenon, but quasi-rent is quite common.
It is created whenever non-repayable specific investments are made.
Therefore, quasi-rent is more common than rent.
Quasi-rent in its value can be either equal to or less than rent, but it cannot exceed rent.
In order to keep a firm in a given industry, a lower income is sufficient compared to what is needed to attract it to a given industry.
The difference between them arises from the existence of costs that a firm (or worker) incurs when entering an industry, and which it cannot recover if it leaves that market.
The payment for the quasi-rent generated is the increased riskiness of specialized investments, the need to seek additional guarantees against the partner’s violation of his obligations.
Quasi-rent can be expropriated, and the owner will not extract the factor from this sphere of its use.
By means of expropriationtions of quasi-rent may be the following.
Illegal way (for example, by gangsters through racketeering).
The legal way is by owners of specialized resources, when a specific resource depends on another resource that is in some way unique. When the owner of this unique resource withdraws his resource, and the substitutes are either very expensive or of lower quality, then the quasi-rent attributable to other specific resources is withdrawn.
There is another type of dependence, which is associated with information asymmetry. In this case, expropriation of quasi-rents may occur if performance is difficult to measure and malpractice is difficult to prevent, but close substitutes may be readily available. For example, an unskilled worker jeopardizes the firm's reputation and its specialized brand investments.
The expropriation of quasi-rent by one of the parties to the transaction is merely a redistribution of wealth.
This is why it would be inappropriate to use antitrust law in situations that are characterized by resource specificity, despite the emergence of a bilateral monopoly relationship after a contract has been concluded and investment in the specific resource has been made.
Antitrust laws are designed to protect consumers from high prices and limited supply caused by a monopoly position of the producer, and the expropriation of quasi-rents does not lead to increased prices for consumers.
It concerns the redistribution of income between the parties to the transaction and does not affect market prices, since quasi-rent is income on sunk capital.
The appropriation of quasi-rent is associated with the expenditure of resources and does not create any value, but only redistributes it.
The threat of extortion from a partner is a major obstacle to making specialized investments.
If a way to prevent the expropriation of quasi-rents is not found, then economic agents will not invest in specific resources.
The problem of extortion also arises from a combination of resource specificity and contract incompleteness.
Preoccupation with these issues leads to inefficient use of resources.
Thus, firms, fearing that their investments will make them vulnerable to extortion, refuse to invest in specific resources.
The correct choice of the type of contract and the method of organizing the transaction helps solve problems arising from the danger of extortion.
However, other solutions to the problem of extortion are possible, related to the mutual trust of the parties.
Transaction cost theory assumes that an economic agent who may behave opportunistically after a transaction is difficult to identify before the transaction is concluded, and those who choose the type of contract and the way the transaction will be structured must constantly consider the potential for extortion by the partner. according to the deal.
This economic theory focuses on the assurance or lack thereof of an agreement and the problems that arise from it, rather than on trust or the lack thereof.
In real economic life, as partners communicate, opportunities arise for the manifestation of opportunistic behavior, and whenever the partner does not take advantage of them, trust increases between the parties, which can lead to the rejection of more stringent forms of guarantees, all other things being equal.
Trust takes time to develop, so the longer the relationship, the higher the level of trust you should expect.
The following are distinguished: types of trust.
Mutual trust can be demonstrated by each party's compliance with oral or written agreements. This type of trust can be called "trust in the contract"(contractual trust). Any transaction is based on contractual trust. These promises may not even be recorded in a written contract, but simply correspond to business customs, and the more the parties rely on oral agreements rather than on the formal terms of the contract, the higher the level of “confidence in the contract.”
This type of trust refers to the expectation that the partner is competent enough to fulfill his obligations. It is about technical and managerial competence, and this type of trust can be called “trust in the competence” of the partner(competence trust). One party may end the relationship if there is opportunistic behavior, but if the reason is lack of competence, the other party may be given another chance if there is evidence that the situation will be corrected within a reasonably short period of time
An indefinite type of trust, which relates rather to the mutual expectations of partners that their counterparty will be ready to meet them halfway, to do more than is formally expected of him. This type of trust is called “trust in the good will” of the partner(goodwillimsi). There are no explicit promises to be made, no fixed professional standards. When we talk about a partner's reputation, we mean the first two types of trust rather than trust in goodwill.
The first two types of trust are based on universal standards and can be learned about by collecting information in the reputation market.
The third type of trust is determined rather in the context of a specific transaction.
Depending on the type of trust, opportunism will manifest itself and be perceived differently.
Withholding technological information that can determine the commercial success or failure of a risky project is opportunistic behavior for the purposes of trust in good will, but such actions cannot be considered opportunistic behavior for purposes of trust in the contract unless the partners have agreed to share that information.
Economists define trust as a type of risk.
When we say that we trust someone or that someone is trustworthy, we implicitly mean that the likelihood that that person will take action that benefits us or at least does not harm us is high enough that consider the possibility of some form of cooperation with him.
The problem of trust can be illustrated in economic theory by the prisoners' dilemma game or its one-sided version.
Economists offer a number of solutions to this one-sided “prisoners' dilemma.”
These decisions consist of some changes to the game in order to encourage players to choose a strategy that will lead to a mutually beneficial outcome.
The logic behind economic decisions is that if individual incentives force a strategy that produces a non-cooperative outcome, then incentives can be used to induce players to cooperate.
Thus, in transaction cost theory, the problem of post-contract opportunism created by specific investments can be solved if A provides for their guarantee in the contract in order to protect itself from the possible opportunistic behavior of B.
Thus, in economic theory, an economic agent can be considered trustworthy if he has no incentive to take advantage of the trust of others.
Conversely, we can confidently expect that with “appropriate incentives” even a reliable partner will not live up to trust.
Exist four main categories of solutions to the dilemma, wholost in the game of trust, proposed by economists.
1. Changing player preferences. In this case, external or internal changes in players' preferences are introduced so that players choose to cooperate rather than follow a short-sighted strategy of maximizing their own benefit. In the case of exogenous changes, it is assumed that the agent has a preference to justify the trust, since otherwise he will experience shame (this is an external sanction). In the case of endogenous changes, an emotional predisposition to cooperation is introduced, which generates a feeling of guilt for deception, which implies the player’s internalization of norms prohibiting profiting at the expense of another player.
2 . Signing an explicit contract. Another way to solve the trust problem is to sign an explicit, binding contract, protected by a third party, that requires players to choose a set of trust, trust, and trust strategies. These contracts can take one of two forms: 1) control with punishment; 2) control with stimulation. A similar approach is characteristic of the economic theory of transaction costs; at the same time, being a solution to the problem that will be the next after the optimal (second best), since control is associated with costs, incentives can be distorted, and third-party coercion requires that the agent’s actions be observable and controllable.
Using an implicit social contract. These include, for example, Lester Greenspan Telser's (b. 1931) self-enforcing agreement model and the reputation model. These solutions require that interactions be repeated or long-term.
Repeated interaction. This solution proposes two strategies to punish players who do not cooperate—the tit-for-tat strategy and the trigger strategy.
In the tit-for-tat strategy, players cooperate in the first round and then choose the strategy that the other player followed in the previous round of the game.
Under the trigger strategy, a player cooperates until the other player refuses to cooperate, and then the first player refuses to cooperate in all subsequent rounds of the game.
Under both strategies, players have an incentive to cooperate as long as they expect cooperation to continue into the next period, the payoff from cooperation is large, and the payoff from cheating is not too large.
The problem with the economic approach to trust is that by changing the structure of the game in such a way as to create an incentive for players to cooperate, economists eliminate the vulnerability of an economic agent to deception on the part of a partner, and thereby eliminate the very need for trust.
If I know that my partner has no incentive to abuse my trust, can I say that I trust him?
By definition, those who trust are vulnerable and cannot do anything to change the situation.
Therefore, there still seems to be a need to distinguish between “trust” created through incentives and trust applied in situations in which players remain vulnerable to the actions and choices of others.
This distinction is important because economists are not always able to explain the role of trust in economic exchange, especially in situations where there are no incentives to justify trust.
Thus, O. Williamson makes a distinction between "trust based on calculationthose"(calculative trust) and "personal trust"(personal trust).
Trust based on calculation is viewed by O. Williamson as an obvious contradiction, presupposing a rational assessment of the benefits and costs of trust.
Personal trust is not based on conscious calculation, but is guaranteed only by special personal relationships, which would be seriously damaged if calculation were allowed.
The institutional environment has a great influence on the choice of contract form, and primarily on the need for certain guarantees when implementing specific investments.
Transactions that are executed in one institutional environment may not be viable in another.
A society with a high level of trust will be less likely to resort to vertical integration to guarantee specific investments than a society with a low level of trust.
In America, the level of trust is low, since economic agents are accustomed to relying on a developed legal system, therefore, with the increase in the specificity of assets in America, firms are more likely to resort to vertical integration than European (German, Scandinavian) or Japanese companies, which, under similar circumstances, will prefer a neoclassical contract.
One of the most important characteristics of a transaction is the nature of the investments made by the parties to the transaction. When you buy bread from a baker, neither party is making an investment for just that specific transaction. The baker invests in the bakery equipment, however, he supplies bread not only to you, but to a large number of customers, and if you refuse to buy bread from him, then your decision will not affect the value of the investment in the bakery equipment. However, if you are stamping parts for a specific brand of vehicle under a contract with a major auto company, your investment in that unique stamping equipment will be worthless if that company calls it quits. These investments are called specific because they lose most of their value outside of that specific transaction. If this equipment is used for other purposes, much of its value will be lost.
The concept of resource specificity was first introduced into economic theory by G. Becker in 1964 in relation to investments in human capital. If a resource is of interest to many producers and its market value depends little on where it is used, then it is a general-purpose resource. A specific resource is one that, in the event of a deal being interrupted, cannot be used in other projects without compromising its economic value. The degree of specificity of a resource can be judged by how much the value of the resource will be reduced when it is used elsewhere.
The literature identifies the following types of resource specificity:
1) Specificity of location. Associated with too high costs of moving a resource. Location specificity can be assumed if enterprises are located in geographic proximity to each other. An example of location specificity would be a power plant built in close geographic proximity to a coal mine. This arrangement allows saving on transportation costs and costs associated with storing coal reserves. After the initial placement of assets, the parties will maintain a bilateral relationship throughout the life of the power plant. Steel foundries and rolling mills are also built in close proximity to each other. Here, savings are achieved due to the absence of the need to heat the steel.
2) Specificity of physical assets. Specificity of physical capital is said to occur when the parties or one of the parties have invested in equipment with certain characteristics that have less value when used in other projects. An example is the furnaces of power plants, which are usually designed for a certain type of coal (with a certain moisture content, sulfur content, chemical composition). Deviation from the type of coal for which this equipment is designed, due to a breakdown in relations with its supplier, will require complex work to re-adjust the furnace, which is associated with significant resource costs.
3) Specificity of human capital. The specificity of human capital is said to exist when, as a result of on-the-job training, workers accumulate special skills that allow them to produce goods and services more efficiently than similar workers who do not have specific human capital do. An example of specific human capital is a manager's knowledge of the administrative features and management culture of the company in which he has worked for many years. This specific knowledge has value only for a given firm and is worthless if the manager loses his job in that firm, for example, as a result of a hostile takeover of the company he manages. The concept of human capital specificity can also refer to the relational skills that arise when working as a team when all team members know each other well.
4) Specificity of target or “intended” assets. Here we are talking about investments in general-purpose resources, which, however, may be intended for a single user. The supplier makes this investment in hopes of selling a significant amount of product to a specific customer. If the contract is terminated, the supplier is left with significant inventories, since there is no demand for them from other buyers. The same situation may arise on the buyer's side. If he ordered a large quantity of products and did not receive it, and cannot find the same quantity of products in the market.
5) Specificity is temporary. This is a characteristic of investments for which the coordination of production is essential (for example, in the production of broiler chickens, their freshness and time of rearing are important, and this complicates the coordination of production; the system of prompt delivery here becomes a decisive factor for success).. The value of resources not delivered on time is significantly reduced.
6. Specificity of reputation, brand. This is a non-repayable investment in creating a reputation or a brand that will lose its value if the company's products or services turn out to be of poor quality.