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

Raymond Fisman and Suman Ghosh

Southern Economic Journal, 2005, vol. 72, issue 2, 433-442

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.

Date: 2005
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https://doi.org/10.1002/j.2325-8012.2005.tb00711.x

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Working Paper: Dynamics of Firm–Supplier Relationships in a Less Developed Economy: Evidence from African Manufacturing Firms (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:soecon:v:72:y:2005:i:2:p:433-442

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