Relational contracts and supplier turnover in the global economy

Arbeitspapier

Headquarters and their specialized component suppliers have a vital interest in establishing long-term collaborations. When formal contracts are not enforceable, such efficiency-enhancing cooperations can be established via informal agreements, but relational contracts have been largely ignored in the literature on the international organization of value chains. In this paper, we develop a dynamic property rights model of global sourcing. A domestic headquarter collaborates with a foreign input supplier and makes two decisions in every period: i) whether to engage in a costly search for a better partner, and ii) whether to make a non-binding offer to overcome hold-up problems. Our key result is that the possibility to switch partners crucially affects the contractual nature of buyer-supplier relationships. In particular, some patient firms do not immediately establish a relational contract, but only when they decide to stop searching and thus launch a long-term collaboration with their supplier. From our model, we develop an instrumental variable estimation strategy that we apply using transaction-level data of fresh Chinese exporters to the US. We obtain empirical evidence in line with the theoretical prediction of a positive causal effect of match durations on relational contracting.

Angaben zum Objekt

• ISBN: 978-3-86304-192-2
• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: DICE Discussion Paper ; No. 193

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Organizational Behavior; Transaction Costs; Property Rights ; Organization of Production ; Multinational Firms; International Business
• Thema: firm organization ; input sourcing ; relational contracts ; supplier search ; processing trade ; China

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Defever, Fabrice ; Fischer, Christian ; Suedekum, Jens
• Ereignis: Veröffentlichung
• (wer): Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE)
• (wo): Düsseldorf
• (wann): 2015

Weitere Informationen

• Handle: http://hdl.handle.net/10419/113829
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ