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Business culture: The role of personal and impersonal business relationships on market efficiency

Author

Listed:
  • Manuel Munoz-Herrera

    ()

  • Ernesto Reuben

    () (Division of Social Science)

Abstract

In this paper, we study the effects of business culture on market effciency. We exogenously vary the type of business culture between business-is-business cultures, which consist on impersonal relationships where fnancial matters are paramount, and business-is-family cultures, which comprise of cohesive personal relationships where fnancial matters and personal attachments are intertwined. We use a laboratory experiment to assess the effect of business cultures in environments with different degrees of contract enforceability and competition. Our main results indicate that business-is-family cultures are more effective when contracts are unverifiable because they help market participants overcome problems of trust. On the other hand, we find that business-is-business cultures are more e ective in competitive settings because they facilitate the severance of ties with unproductive partners.

Suggested Citation

  • Manuel Munoz-Herrera & Ernesto Reuben, 2019. "Business culture: The role of personal and impersonal business relationships on market efficiency," Working Papers 20190027, New York University Abu Dhabi, Department of Social Science, revised Jun 2019.
  • Handle: RePEc:nad:wpaper:20190027
    as

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    References listed on IDEAS

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    More about this item

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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