Transnational Business and Relational Contracting 2.0

Thomas Dietz ()
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Thomas Dietz: University of Muenster - Institute of Political Science & ZenTra

No 45 / 2015, ZenTra Working Papers in Transnational Studies from ZenTra - Center for Transnational Studies

Abstract: First, this article proposes that the rise of the Internet and further information- and communication technologies (ICT) has facilitated the evolution of a new, virtual form of relational contracts. This hypothesis is developed inductively by drawing on the results of an explorative empirical study about cross-border software development contracts. Although virtual social ties and networks do not promote the type of high-trust relations that are central to traditional relational contract theory, they reduce information asymmetries between transaction partners and facilitate the evolution of almost unrestricted virtual reputational networks. Relational contracts 2.0 emerge on the basis of ICT enabled transparency, controls and sanctioning tools. Second, the article discusses these results in the light of the wider theoretical debate about the institutional foundations of modern markets. Most importantly, it will be argued that modern ICT has significantly improved the economic performance of relational contracts. Relational contracts 2.0 are no longer restricted to small communities and long-term relationships, but are also able to allow exchange between unknown actors within competitive markets. Relational contracts 2.0 therefore do not oppose market expansions, but become mechanisms that actively promote such economic modernisation processes. The virtual society promotes the evolution of virtual relational contracts.

Keywords: Contract Theory; Informal Norms; Relational Contract; Virtual Ties; Software-Industry (search for similar items in EconPapers)
JEL-codes: A14 B15 K12 L14 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2015-01
New Economics Papers: this item is included in nep-ict and nep-soc
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http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2549020 Current version, 2015 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:zen:wpaper:45

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