Formal and Informal Contracting in Interfirm Relationships
Abstract: : In this paper, using a large database concerning more than 3 450 strategic relationships in force between French firms in 2003, we study the way they govern their relationships. More precisely, we show that depending on the characteristics of their relationships observed governance structures features combined relational as well as formal elements. Those two dimensions might be complement or substitute depending on characteristics and expected results of the relationships as well as reputation of contracting partners. Our results thus suggest that competing theoretical frameworks focusing on informal agreements or on formal agreements might miss a part of the story. We suggest how those dimensions might complete or substitute each other shedding new light on previous empirical results on this issue.
