Culture, Law, and Contractual Relations

Alireza Naghavi, Giuseppe Pignataro and Katja Zajc Kejzar

No 487, Development Working Papers from Centro Studi Luca d'Agliano, University of Milano

Abstract: This paper explores the role of culture in firm organization and its interplay with legal enforcement in determining the organization and longevity of buyer-supplier relationships. We provide theory and evidence, showing how individualism and legal enforcement interact and affect firm behavior in industries with different technological characteristics. A higher level of individualism in source countries encourages integration (outsourcing) in high-(low-) technology industries. Legal institutions could increase the duration of contractual relationships by encouraging customization effort by individualistic suppliers with a sense of pride, while preventing infringement of sensitive technologies by those less concerned about self-achievement. Enforcement could however adversely affect the continuity of trade relations in more individualistic societies.

Keywords: Individualism; Supplier relation longevity; Legal institutions; Firm organization; Technology; Infringement; Knowledge absorption; Contract enforcement; Customization; Pride (search for similar items in EconPapers)
JEL-codes: D23 F14 F23 K42 L24 O32 Z10 (search for similar items in EconPapers)
Date: 2023-05-10, Revised 2024-01-16
New Economics Papers: this item is included in nep-law
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Persistent link: https://EconPapers.repec.org/RePEc:csl:devewp:487

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