Contract law, social norms and inter-firm cooperation

This paper analyses the regulation of inter-firm contracting in Germany, Britain and Italy. Contrary to earlier empirical studies and to models drawn from transaction-cost theory, we find that contract law may play an important role in underpinning long-term, cooperative relationships and in fostering trust. The impact of contract law depends on the relationship between the legal system and other forms of institutional regulation, including trade associations and standard-setting bodies.