Working Together and Working Things Out: Dispute Resolution in Repeated Vertical Exchange Relationships

Posted: 18 Feb 2008 Last revised: 2 May 2011

See all articles by Fabrice Lumineau

Fabrice Lumineau

University of Hong Kong

Joanne E. Oxley

University of Toronto - Joseph L. Rotman School of Management

Date Written: January 10, 2009

Abstract

In this paper we explore the impact of relational history on firms' willingness to "work things out" in subsequent agreements, by examining the way that disputes between partners in vertical exchange relationships are actually resolved. Counter to the received wisdom we find no evidence of an automatic preference for private dispute resolution (negotiation, mediation or arbitration) among repeat transactors, relative to those in new exchange relationships - the act of working together does not appear to increase exchange partners' ability to work things out in all instances. However, we find that when there is evidence of the existence of cooperative norms in previous dealings between the partners, subsequent disputes are significantly more likely to be settled privately, as expected. In contrast, in cases where previous interactions are described in negative terms disputes are just as likely to end in litigation as if they were new partnerships. Indeed, we find some evidence of a higher propensity to turn to the courts for compensation when repeated conflict undermines familiarity-based trust.

Keywords: Repeat exchange, Contract disputes, Litigation, Dispute resolution

Suggested Citation

Lumineau, Fabrice and Oxley, Joanne E., Working Together and Working Things Out: Dispute Resolution in Repeated Vertical Exchange Relationships (January 10, 2009). Available at SSRN: https://ssrn.com/abstract=1094688

Fabrice Lumineau

University of Hong Kong ( email )

HKU Business School
Hong Kong
Hong Kong

Joanne E. Oxley (Contact Author)

University of Toronto - Joseph L. Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada
416-978-0305 (Phone)

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