Contract flexibility and conflict resolution: evidence from African manufacturing

This paper examines the contractual practices of African manufacturing firms using survey data collected in Burundi, Cameroon, Ghana, Ivory Coast, Kenya, Zambia and Zimbabwe. Descriptive statistics and econometric results are presented. They show that contractual flexibility is pervasive and that relational contracting is the norm between manufacturers, their suppliers, and their clients. The existence of long-term relations between firms helps them deal with contract non-performance through negotiation. Confrontational methods such as lawyers and courts are used when negotiations fail. Whenever confrontation can be avoided, business is resumed. Correspondence: Marcel Fafchamps, World Bank, 1818 H. Street NW, Washington DC 20433, US. E-mail: fafchamp@leland.stanford.edu. Web address: http://www-leland.stanford.edu/~

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