Fabrice Defever
Relational contracts and supplier turnover in the global economy
Defever, Fabrice; Fischer, Christian; Suedekum, Jens
Authors
Christian Fischer
Jens Suedekum
Abstract
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. Using firm-product-level data of fresh Chinese exporters to the US, we obtain empirical evidence in line with the predictions of our theory.
Citation
Defever, F., Fischer, C., & Suedekum, J. (2016). Relational contracts and supplier turnover in the global economy. Journal of International Economics, 103, 147-165. https://doi.org/10.1016/j.jinteco.2016.09.002
Journal Article Type | Article |
---|---|
Acceptance Date | Sep 16, 2019 |
Online Publication Date | Sep 22, 2019 |
Publication Date | 2016-11 |
Deposit Date | Jan 10, 2020 |
Publicly Available Date | Mar 28, 2024 |
Journal | Journal of International Economics |
Print ISSN | 0022-1996 |
Electronic ISSN | 1873-0353 |
Publisher | Elsevier |
Peer Reviewed | Peer Reviewed |
Volume | 103 |
Pages | 147-165 |
DOI | https://doi.org/10.1016/j.jinteco.2016.09.002 |
Public URL | https://nottingham-repository.worktribe.com/output/3701955 |
Publisher URL | https://www.sciencedirect.com/science/article/pii/S0022199616301064 |
Additional Information | This article is maintained by: Elsevier; Article Title: Relational contracts and supplier turnover in the global economy; Journal Title: Journal of International Economics; CrossRef DOI link to publisher maintained version: https://doi.org/10.1016/j.jinteco.2016.09.002; Content Type: article; Copyright: © 2016 Elsevier B.V. All rights reserved. |
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