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The role of trust in contractual relationships

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  • Bakucs, Lajos Zoltan
  • Ferto, Imre

Abstract

The paper investigates the opinion of small- and medium size enterprises in agri-food chain on the role of trust in contractual relationships using a survey in Central Hungarian region. Contrary to our expectations, a relatively high share of respondents poses written contracts. Estimations show that there are no significant differences between various levels of agri-food chain regarding to existence of written contract. Our results suggest that asset specificity, firm size and frequency of partner change increase the probability of written contract. Trust in most important partner has ambiguous impact upon the existence of a formal contract. Trust in public legal enforcement and the efficiency of the legal system also play important roles on the existence of written contract. Sectorial specificity has positive and significant effects on the written contract.

Suggested Citation

  • Bakucs, Lajos Zoltan & Ferto, Imre, 2013. "The role of trust in contractual relationships," 87th Annual Conference, April 8-10, 2013, Warwick University, Coventry, UK 158870, Agricultural Economics Society.
    • Handle: RePEc:ags:aesc13:158870
    DOI: 10.22004/ag.econ.158870
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    References listed on IDEAS

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    1. Lyons, Bruce R, 1994. "Contracts and Specific Investment: An Empirical Test of Transaction Cost Theory," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 3(2), pages 257-278, Summer.
    2. Williamson, Oliver E, 1979. "Transaction-Cost Economics: The Governance of Contractural Relations," Journal of Law and Economics, University of Chicago Press, vol. 22(2), pages 233-261, October.
    3. Bruce R. Lyons, 1994. "Contracts and Specific Investment: An Empirical Test of Transaction Cost Theory," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 3(2), pages 257-278, June.
    4. Klein, Roger W & Spady, Richard H, 1993. "An Efficient Semiparametric Estimator for Binary Response Models," Econometrica, Econometric Society, vol. 61(2), pages 387-421, March.
    5. Zoltán Bakucs, Lajos & Fertő, Imre & Szabó, Gábor G., 2010. "Contractual relationships in the Hungarian milk sector," IAMO Forum 2010: Institutions in Transition – Challenges for New Modes of Governance 52700, Leibniz Institute of Agricultural Development in Central and Eastern Europe (IAMO).
    6. Beckmann, Volker & Boger, Silke, 2004. "Courts and contract enforcement in transition agriculture: theory and evidence from Poland," Agricultural Economics, Blackwell, vol. 31(2-3), pages 251-263, December.
    7. Zoltán Bakucs & Imre Fertő & Gábor G. Szabó, 2012. "Benefits of a marketing cooperative in transition agriculture: Mórakert purchasing and service co-operative," Society and Economy, Akadémiai Kiadó, Hungary, vol. 34(3), pages 453-468, September.
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