Courts and Relational Contracts
Journal ArticleAuthors
Simon Johnson
John McMillan
Christopher Woodruff
Published by
The Journal of Law, Economics & Organization, Vol. 18 no. 1, page(s) 221-277
April, 2002
Post-communist countries offer new evidence on the relative importance of courts and relationships in enforcing contracts. Belief in the effectiveness of courts has a significant positive effect on the level of trust shown in new relationships between firms and their customers. Well-functioning courts also encourage entrepreneurs to try out new suppliers. Courts are particularly important when specific investments are needed for a relationship to develop. While relationships can sustain existing interactions, workable courts help new interactions to start and develop.
Topics: Economics






