Mapping the Landscape of Transactions: The Governance of Business Relations in Latin America

70 Pages Posted: 26 Apr 2019

See all articles by David Francis

David Francis

World Bank, Development Economics

Nona Karalashvili

World Bank

Peter Murrell

University of Maryland - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: April 26, 2019

Abstract

To what extent do firms use trust, law, and third-parties to ensure fulfillment of agreements to transact? How do they combine these mechanisms to form transactional governance structures? How do answers to these questions vary across countries? Generating the relevant data requires constructing a survey question answerable by any firm, anywhere. The question is administered in six South American countries. Applied to the resultant data, latent class analysis (LCA) estimates classes that correspond to the transactional governance structures that firms employ to support implementation of agreements. Without imposing an a priori model, LCA discovers meaningful governance structures. Bilateralism appears in all governance structures. Law is never used alone. Bilateralism and formal institutions are sometimes complements, never substitutes. Within-country regional variation in the use of bilateralism and law exceeds cross-country variation. LCA provides the posterior probabilities that each firm uses each governance structure, facilitating testing hypotheses consequent on Williamson's discriminating-alignment agenda.

Keywords: Governance, Transactions, Law, Bilateralism, Latin America

JEL Classification: L14, C81, D23, P5, M21

Suggested Citation

Francis, David and Karalashvili, Nona and Murrell, Peter, Mapping the Landscape of Transactions: The Governance of Business Relations in Latin America (April 26, 2019). Available at SSRN: https://ssrn.com/abstract=3378731 or http://dx.doi.org/10.2139/ssrn.3378731

David Francis

World Bank, Development Economics ( email )

1818 H St NW
Washington, DC 20433
United States

Nona Karalashvili

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Peter Murrell (Contact Author)

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States
301-405-3476 (Phone)
301-405-3542 (Fax)

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