Transactional-governance structures:new cross-country data and an application to the effect of uncertainty

Peter Murrell, Nona Karalashvili and David C Francis

The Journal of Law, Economics, and Organization, 2024, vol. 40, issue 3, 891-929

Abstract: To what extent are personal trust, mutual interests, and third parties important in enforcing agreements to trade? How do firms combine these to form transactional-governance structures? This article answers these questions in a whole-economy, cross-country setting that considers a full spectrum of transactional-governance strategies. The data collection requires a new survey question answerable in any context. The question is applied in six South American countries using representative samples, with the resultant survey weights facilitating a whole-economy analysis. Without imposing an a priori model, latent class analysis estimates meaningful governance structures. Bilateralism is always used. Law is never used alone. Bilateralism and formal institutions are rarely substitutes. Within country, inter-regional variation in governance is greater than inter-country variation. The usefulness of the data is shown by testing one element of Williamson’s discriminating-alignment agenda: greater uncertainty in the transactional environment increases the involvement of third parties.

JEL-codes: C81 D23 L14 M21 P5 (search for similar items in EconPapers)
Date: 2024
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