An institutional analysis of the implicit transaction between anchor tenant and non-anchor tenant in a shopping mall

Abstract

This thesis examines mall management from a new institutional perspective. Mall-owners seldom solely rely on market forces to lease shops to highest bidders, disregarding tenants’ retail businesses. Mall-owners decide the type of tenants for specific space allotments in the mall, which can be regarded as commands in Coasean firms, i.e., tenant mix management (TMM). The proposition is that TMM is an institutional arrangement that emerges to capture part of the potential gain from the unobserved transactions between Anchor Tenant (AT) and Non-Anchor Tenant (NAT) in a comprehensive mall. Six hypotheses are developed for testing with real-life observations. Although TMM of a Coasean firm where the market mechanism is replaced by commands is not new, extant literature mostly focus on comparing transaction costs using firm (internal resources) with transaction costs using market (outsourcing) to explain observed institutional arrangements, and how firm boundary is determined. This study introduces a new perspective in focusing on unrealized gains from potential transactions between AT and NAT within the mall (Coasean firm). This perspective is important in understanding the nature of the commands within the firm and has wider theoretical implications. First, the existence of firms is not only about comparison of transaction costs within or outside the firm, but also about transaction costs of the unobserved potential transactions between parties within the firm. The commands can capture dissipated rent from potential transactions (i.e. potential transaction gain) if the transaction costs of using the commands are lower than the potentially dissipated rent. This means that rent dissipation and transaction costs are two sides of the same coin, substitutable for each other. Second, potentially beneficial transactions between parties inside a firm can be generalized to firm’s teamwork because team members constantly exchange skills without explicit contractual arrangements, merely following instructions (commands) to jointly perform tasks. This sheds light on understanding the management’s coordinating function, yielding more hypotheses. Third, TMM replaces AT-NAT contractual arrangements by the contractual arrangements between mall-owners (residual claimants) and AT or NAT. AT discounts (ATD) and NAT premiums (NAP) in the latter are guided by market forces. This means the market and Coasean firm are not mutually exclusive concepts and arrangements. Accordingly, focusing on the choice of contractual arrangements under different constraints is more promising than focusing on dichotomous treatment of firms and market. This study makes use of empirical observations in Hong Kong because comprehensive and specialty malls in single and multiple ownerships coexist there. Particularly, observations on subdivided malls are valuable in testing the importance of potential transactions between AT and NAT in a comprehensive mall. All six hypotheses are consistent with real-life observations, which contribute to existing corporate asset management literature on mall management, and offer explanations for why AT can rent at discounts, why AT only exist in comprehensive malls and not in specialty malls, whether multiple ownership is more likely to be observed in specialty malls, and why subdividing comprehensive malls for sale to multiple investors must fail (either vacant or huge value decline).