Relational ties or customized contracts? An examination of alternative governance choices in China

Research output: Journal Publications and ReviewsRGC 21 - Publication in refereed journalpeer-review

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Original languageEnglish
Pages (from-to)526-534
Journal / PublicationJournal of International Business Studies
Issue number3
Publication statusPublished - Apr 2008


As business transactions become more complex in China - an increasingly market-driven economy - are managers more likely to employ relational ties or contracts? Consistent with the view that personal institutions govern transactions in China, our analysis of 361 buyer-supplier exchanges indicates that managers rely more on relational ties as asset specificity and uncertainty increase. We also find some support that impersonal institutions govern market transactions: as uncertainty increases, managers craft more customized contracts. Surprisingly, there is no association between contracts and asset specificity. These results hold for both local and foreign firms. © 2008 Academy of International Business All rights reserved.

Research Area(s)

  • China, Emerging economies, Governance transitions, Legal contracts, Relational ties