Business culture: The role of personal and impersonal business relationships on market efficiency

Manuel Munoz and Ernesto Reuben

No 20190027, Working Papers from New York University Abu Dhabi, Department of Social Science

Abstract: In this paper, we study the effects of business culture on market effciency. We exogenously vary the type of business culture between business-is-business cultures, which consist on impersonal relationships where fnancial matters are paramount, and business-is-family cultures, which comprise of cohesive personal relationships where fnancial matters and personal attachments are intertwined. We use a laboratory experiment to assess the effect of business cultures in environments with different degrees of contract enforceability and competition. Our main results indicate that business-is-family cultures are more effective when contracts are unverifiable because they help market participants overcome problems of trust. On the other hand, we find that business-is-business cultures are more e ective in competitive settings because they facilitate the severance of ties with unproductive partners.

Pages: 39 pages
Date: 2019-06, Revised 2019-06
New Economics Papers: this item is included in nep-exp
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https://nyuad.nyu.edu/content/dam/nyuad/academics/ ... papers/2019/0027.pdf First version, 2019 (application/pdf)

Related works:
Working Paper: Business Culture: The Role of Personal and Impersonal Business Relationships on Market Efficiency (2019)
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