Transnational economic governance

What role do contract enforcement institutions provided by the state play for economic development? This question has often been addressed. However, empirical research in this field looks predominantly at transactions that are conducted domestically. Less research exists regarding the enforceability of contracts in cross-border transactions. In other words, research that addresses the institutional foundations of international exchange processes is still in its infancy. The following case study investigates the contract enforcement institutions that enable German customers to purchase software in Asian and East European Countries. This paper`s main argument is that nation states are not capable of providing a workable legal infrastructure for cross-border transactions. Instead, economic actors create their own informal mechanisms in order to enforce their contracts. Particularly important are relational contracts and reputational networks. Furthermore, the empirical evidence shows that German enterprises comprehensively use the opportunities offered by new developments in information and communication technology, when it comes to the initiation and control of their foreign business relations. Due to such technical innovation, it therefore seems that both reputational networks and relational contracts gain more and more efficiency compared to state private law.