Dynamics of Firm–Supplier Relationships in a Less Developed Economy: Evidence from African Manufacturing Firms

Raymond Fisman () and suman Ghosh ()
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Raymond Fisman: Columbia Business School

No 4024, Working Papers from Department of Economics, College of Business, Florida Atlantic University

Abstract: In this paper, we study supplier–firm interactions to explain firms' outsourcing relationships. We show that in an imperfect information setup a firm learns about the quality of its suppliers through repeated interaction. As the firm determines the suppliers' quality with greater precision, it gives a greater proportion of its contracts to these “better” suppliers. We report evidence from African manufacturing firms that is consistent with our hypothesis: both frequency and volume of transactions increase with the length of a firm's relationship with its supplier. These effects are stronger in poor contracting environments.

JEL-codes: D21 D82 L20 (search for similar items in EconPapers)
Date: 2004-02, Revised 2005-04

Published in Southern Economic Journal, Vol. 72, No. 2

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http://apt.allenpress.com/aptonline/?request=get-a ... 2&issue=02&page=0433 Published version, 2005 (application/pdf)

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Persistent link: http://EconPapers.repec.org/RePEc:fal:wpaper:04024

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