Kinship, Control, and Incentives
35 Pages Posted: 26 Dec 1998
Date Written: October 1998
Abstract
Opportunistic behavior can be resolved through contract or by adjusting the structure of ownership. Previous scholarship has focussed on economic factors that influence the trade-off between contract and ownership. We focus on the effect of a cultural factor -- kinship -- and hypothesize that the presence of kinship ties leads to a relative preference for contract over ownership as the way to resolve opportunistic behavior. This hypothesis is tested on a data set of Taiwanese direct investments in Mainland China. The results provide fairly strong support to the hypothesis.
JEL Classification: F2, G2, K1, L2
Suggested Citation: Suggested Citation
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