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Relational Contracts and Trust in a High-Tech Industry

Author

Listed:
  • Felli, Leonardo
  • Calzolari, Giacomo
  • Koenen, Johannes
  • Spagnolo, Giancarlo
  • Stahl, Konrad

Abstract

We study how informal buyer-supplier relationships in the German automotive industry affect procurement. Using unique data from a survey focusing on these, we show that more trust, the belief that the trading partner acts to maintain the mutual relationship, is associated with both higher quality of the automotive parts and more competition among suppliers. Yet both effects hold only for parts involving unsophisticated technology, not when technology is sophisticated. We rationalize these ï¬ ndings within a relational contracting model that critically focuses on changes in the bargaining power, due to differences in the costs of switching suppliers.

Suggested Citation

  • Felli, Leonardo & Calzolari, Giacomo & Koenen, Johannes & Spagnolo, Giancarlo & Stahl, Konrad, 2021. "Relational Contracts and Trust in a High-Tech Industry," CEPR Discussion Papers 16653, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:16653
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    Cited by:

    1. is not listed on IDEAS
    2. Anderlini, L. & Felli, L. & Piccone, M., 2022. "The Emergence of Enforcement," Cambridge Working Papers in Economics 2250, Faculty of Economics, University of Cambridge.
    3. Macchiavello, Rocco & Morjaria, Ameet, 2022. "Empirical approaches to trust and relational contracts," International Journal of Industrial Organization, Elsevier, vol. 84(C).
    4. repec:ags:aaea22:335732 is not listed on IDEAS
    5. Keefer, Philip & Vlaicu, Razvan, 2024. "Employee trust and performance constraints in public sector organizations," European Journal of Political Economy, Elsevier, vol. 81(C).
    6. Rocco Macchiavello & Ameet Morjaria, 2023. "Relational Contracts: Recent Empirical Advancements and Open Questions," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 179(3-4), pages 673-700.

    More about this item

    Keywords

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    JEL classification:

    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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