Contract flexibility and dispute resolution in African manufacturing
AbstractThis article examines the contractual practices of African manufacturing firms using survey data collected in Burundi, Cameroon, Cote d'lvoire, Kenya, Zambia, and Zimbabwe. Descriptive statistics and econometric results are presented. They show that contractual flexibility is pervasive and that relational contracting is the norm between manufacturers, their suppliers, and their clients. The existence of long-term relations between firms helps them deal with contract non-performance through negotiation. Confrontational methods such as lawyers and courts are used only by large firms and when negotiations fail. Whenever confrontation can be avoided, business is resumed. Of the six studied countries, incidence of breach and the use of lawyers and courts are highest in Zimbabwe which is also the country with legal institutions that best support business. Our favoured interpretation is that good legal institutions incite firms to take more chances, thereby encouraging trade and leading to more cases of breach and more recourse to courts and lawyers. A high frequency of contract non-compliance should thus not be interpreted as a sign of imperfect legal institutions.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Journal of Development Studies.
Volume (Year): 36 (2000)
Issue (Month): 4 ()
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Other versions of this item:
- Paul Collier & Marcel Fafchamps & Francis Teal & Stefan Dercon, 1999. "Contract flexibility and dispute resolution in African manufacturing," Economics Series Working Papers WPS/1999-20, University of Oxford, Department of Economics.
- Arne Bigsten & Paul Collier & Stefan Dercon & Marcel Fafchamps & Bernard Gauthier & Jan Willem Gunning & Abena Oduro & Remco Oostendorp & Cathy Patillo & Mans Soderbom & Francis Teal & Albert Zeufack, 1999. "Contract Flexibility and Dispute Resolution in African Manufacturing," CSAE Working Paper Series 1999-20, Centre for the Study of African Economies, University of Oxford.
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