Trust-based agreements and long-term collaborations play a vital role in mitigating inefficiencies from incomplete contracts in global value chains. This column suggests that the possibility to switch partners crucially affects the contractual nature of buyer-supplier relationships. Using transaction-level data of Chinese exporters to the US, it also presents empirical evidence that confirms a positive causal effect of match durations on relational contracting.
Fabrice Defever, Christian Fischer, Jens Südekum, 24 October 2015
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