Rational irrationality; the making of property decisions in firms as a part of resource allocation processes- a Korean example

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Copyright: Hwang, Hyemi
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Abstract
According to the profit maximising assumption and neoclassic economics view of the behaviour of the firm, no firm is expected to behave differently in the market or it will be forced out of the market by incurring higher costs than the competitors. This research aims to investigate how property decisions as a part of resource allocation processes can be understood away from seemingly unrealistic and restrictive view of neoclassical economic theory of the nature of the firm and what motivates firms to behave in such ways that are observed in property markets. By internalising incurring transaction costs, accepting the bounded rationality of people involved in property decision-making and recognising asset specificity, what a firm achieves is a new set of motivational assumptions which are distinguished from the theory of neoclassical economics on the nature of the firm. This new set of behavioural assumptions, derived from institutional economics, provides a little more realism to understanding the nature of the firm. It is also expected to broaden microeconomics approach into property decision making behaviours. Questionnaires given to asset and property managers in property markets in Korea for the interfirm-level behaviour of firms and interviews with employees in corporations in Korea provided insights into how property decisions are made as a part of resource allocation processes and the past experiences of firms in property markets for both an examination of intra- and interfirm-level behaviour. The aim of the research is achieved with illustrating of a theoretical property decision mechanism for a firm. By synthesising a theoretical framework of assumptions of firms’ behaviour and the results from the analysis, the theoretical mechanism will be formulated and presented as a two parts algorithm illustrating how property decisions are made internally and consequently in the property markets. Non-monetary values of property, which include values of property ownership and attributed values of property, were identified to motivate firms to take one of the proposed initial positions. Inefficiency in the property market often forces firms to reposition themselves in the market. The culture which is formed by the authority figures in the corporate structure, also affected property decisions in the property market.
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Author(s)
Hwang, Hyemi
Supervisor(s)
Runeson, Göran
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Publication Year
2011
Resource Type
Thesis
Degree Type
PhD Doctorate
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