Do we need handshakes to cooperate in buyer-supplier relationships?

José De Sousa () and Xavier Fairise ()

No 09-15, Documents de recherche from Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne

Abstract: Based on differences in production costs, McLaren (1999) [“Supplier relations and the market context: a theory of handshakes”, Journal of International Economics 48, 121-138] demonstrates that informal ‘handshake’ arrangements foster cooperation in buyer-supplier relationships, compared to formal contractual arrangements. This may explain international differences in procurement practices, such as American vs. Japanese. However, McLaren’s result holds under particular assumptions about production costs. Allowing for more traditional assumptions in procurement practices, such as relationship-specific investment costs and renegotiable contracts, we find in contrast that formal contractual arrangements may induce more cooperation than handshakes.

Keywords: Incomplete contracts; relationship-specific investments; cooperation (search for similar items in EconPapers)
JEL-codes: C7 K12 L22 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.univ-evry.fr/fileadmin/mediatheque/uev ... es/Epee/wp/09-15.pdf (application/pdf)

Related works:
Working Paper: Do we need handshakes to cooperate in buyer-supplier relationships? (2010)
Working Paper: Do we need handshakes to cooperate in buyer-supplier relationships? (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eve:wpaper:09-15

Access Statistics for this paper

More papers in Documents de recherche from Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne Contact information at EDIRC.
Bibliographic data for series maintained by Samuel Nosel ().