Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/202744 
Year of Publication: 
2019
Series/Report no.: 
IZA Discussion Papers No. 12398
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
In this paper, we study the effects of business culture on market efficiency. We exogenously vary the type of business culture between business-is-business cultures, which consist on impersonal relationships where financial matters are paramount, and business-is-family cultures, which comprise of cohesive personal relationships where financial matters and personal attachments are intertwined. We use a laboratory experiment to assess the effect of business cultures in environments with different degrees of contract enforceability and competition. Our main results indicate that business-is-family cultures are more effective when contracts are unverifiable because they help market participants overcome problems of trust. On the other hand, we find that business-is-business cultures are more effective in competitive settings because they facilitate the severance of ties with unproductive partners.
Subjects: 
trust
contracts
competition
business culture
communication
social ties
JEL: 
D91
L22
M14
Document Type: 
Working Paper

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