Trust and Contractual Relations in an Emerging Capitalist Economy: The Changing Trading Relationships of Ten Large Hungarian Enterprises

Abstract

Inter-firm relationships vary greatly between capitalist economies as a result of institutional differences, especially in forms of trust and prevalent mechanisms of ensuring that commercial agreements are kept. The transformation of the command economies of Eastern Europe since 1989 and the intensification of competition in their major markets might be expected to destroy previous connections between suppliers and customers and generate instead short-term, ad hoc contractual relationships. However, this study of ten large enterprises in Hungary found that contractual relations between them tended to be more similar to the Japanese firms studied by Sako in her Prices, Quality and Trust (1992) than to the British ones. This seems to reflect the limited extent of change in products, markets and organizational structures of these firms — and the gradual approach to transformation adopted in Hungary as a whole — as well as their specialization in particular industrial branches and their high degree of mutual dependence through debt. Continued dependence on the state has meant that competition between these firms for political support remains important and so they compete more across industrial sectors than within them.

Market Organization in Indonesia: Javanese and Chinese Family Business in the Jamu Industry

“…There are many possible bases, ranging from highly specified and/or standardized contracts for the anonymous exchange of commodities to informal ties based on personal or kinship ties between owners/managers of firms (Whitley 1994: 162). Generally speaking, interfirm linkages can be based on written contracts with various degrees of specificity, oral agreements, or combinations of both, while the importance of personal ties can vary greatly (Whitley et al 1996). The principal idea behind the market organization concept is that the relative effectiveness and ease of formation of various inter-firm structures is hindered or encouraged by nationally distinct social institutions.…”

Between a Rock and a Hard Place: Developing Organizational and Institutional Fit in MNE Subsidiary Political Strategy in Contexts of Institutional Upheaval

“…Since the start of its post-socialist transition in the 1990s, Hungary has been an important case for scholars (Martin, 2013;Stark and Bruszt, 1998;Whitley et al, 1996). By the mid-2000s, it had advanced to one of the most consolidated democracies among postsocialist countries (EBRD, 2005).…”

Bank and investment fund monitoring of privatized firms in Russia1

“…The scope for the development of such relationships in Russia would appear to be high, not least because managers have been used to dealing with the same regional branches of state-owned banks for decades. The importance of such relationships is likely to be reinforced in an environment where managers are well versed in the importance of personal business networks as effective mechanisms for circumventing the problems caused by planning failure (Whitley et al, 1996;Child and Czegledy, 1996;Filatotchev et al, 1996a), where managers have been unfamiliar with a contract-based approach to doing business (Ralston et al, 1997), where there continue to be problems in implementing a framework of legally-enforceable contracts and where there are different perspectives on ethical business behaviour (Hisrich el al., 1997;Filatotchev, Starkey and Wright, 1994). *…”