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Enhancing Cooperation in Interfirm Relationships: The Role of Reputation and (In)Formal Agreements


Jean Beuve, Stéphane Saussier

Gregor IAE – University of Paris I, 21 rue Broca, 75 005 Paris

(jean.beuve@univ-paris1.fr, stephane.saussier@univ-paris1.fr)

 

Abstract 

 In this paper, we use a large database of more than 3 700 interfirm relationships in force between French firms in 2003 to study the way they achieve cooperation. We find that cooperation is enhanced by a partner’s reputation. Our results also suggest that while formal contracts have a direct negative impact on ex-post cooperation, they are an enhancing factor of cooperative behaviors as soon as the intrinsic hazards of the relationship require higher ex-ante contractual safeguards to secure agreements.

 

Keywords: cooperation, formal contract, interfirm relationships, reputation.     

JEL codes: L14

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