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Relational contracts and supplier turnover in the global economy

Title data

Defever, Fabrice ; Fischer, Christian ; Suedekum, Jens:
Relational contracts and supplier turnover in the global economy.
In: Journal of International Economics. Vol. 103 (2016) . - pp. 147-165.
ISSN 0022-1996
DOI: https://doi.org/10.1016/j.jinteco.2016.09.002

Abstract in another language

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.

Further data

Item Type: Article in a journal
Refereed: Yes
Institutions of the University: Faculties > Faculty of Law, Business and Economics > Department of Economics
Faculties
Faculties > Faculty of Law, Business and Economics
Faculties > Faculty of Law, Business and Economics > Department of Economics > Juniorprofessur Internationale Volkswirtschaftslehre > Juniorprofessur Internationale Volkswirtschaftslehre - Juniorprof. Dr. Christian Fischer
Faculties > Faculty of Law, Business and Economics > Department of Economics > Juniorprofessur Internationale Volkswirtschaftslehre
Result of work at the UBT: No
DDC Subjects: 300 Social sciences > 330 Economics
Date Deposited: 20 Apr 2017 13:17
Last Modified: 27 Apr 2017 06:34
URI: https://eref.uni-bayreuth.de/id/eprint/36804