How Does the Lack of Guarantees Influence Organizational Failures? Evidences from a Complex Food Chain.

Silvia M.Q. Caleman (University of São Paulo)
Decio Zylbersztajn (University of São Paulo)

Abstract: The role of formal and informal institutions in organizational economics is traditionally analyzed in terms of efficient governance mechanisms that minimize transaction costs. Based on a different perspective, the present paper focuses on organizational failures and the problem of lack of guarantees in sequential transactions. In particular, the paper examines a bundle of guarantees that supports a particular transaction and its relation with inefficiencies in the economic exchange. A model relating property rights, guarantees and institutions is proposed for the understanding of organizational failures. The model is then applied to contractual failures in the Brazilian Beef Chain. The authors perform a multiple logistic regression model regarding producers’ perception of the lack of guarantees. The analysis suggests the existence of a guarantee vacuum within transactions between cattle producers and the beef industry. The paper concludes by pointing out the consequences of the analysis for the examination of complex transactions.

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