Competition and Trust: Evidence from German Car Manufacturers

Felli, Leonardo; Koenen, Johannes and Stahl, Konrad O. (February 2011): Competition and Trust: Evidence from German Car Manufacturers. SFB/TR 15 Discussion Paper No. 349

Abstract

We explore the determinants and effects of trust relationships between upstream suppliers and downstream producers. Using unique survey data on individual supplier-buyer relationships in the German automotive industry, we show, by means of different measures of supplier-buyertrust, tha thigher levels of trust mitigate relationship-specific underinvestment in a classical hold-up situation. Moreover, contrary to the extant literature, we show that higher levels of supplier’s trust are reflected in the buyer’s choice of a more competitive procurement strategy among potential suppliers.

• Item Type: Paper
• Keywords: Trust, Hold-up problem, Competition, Speci?c investment, Suppliers, Car manufacturers, German automotive industry
• Faculties: Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems; Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > C6 - Kommunikations- und Transporttechnologien, Industrie- und Regionalstruktur
• Subjects: 300 Social sciences > 330 Economics
• Language: English