The Value of Relationships: Evidence from a Supply Shock to Kenyan Rose Exports
51 Pages Posted: 2 Jul 2013
Date Written: June 2013
This paper provides evidence on the importance of reputation, intended as beliefs buyers hold about seller's reliability, in the context of the Kenyan rose export sector. A model of reputation and relational contracting is developed and tested. We show that 1) the value of the relationship increases with the age of the relationship; 2) during an exogenous negative supply shock sellers prioritize relationships consistently with the predictions of the model; and 3) reliability at the time of the shock positively correlates with future survival and relationship value. Models exclusively focusing on enforcement or insurance considerations cannot account for the evidence.
Keywords: exports, relational contracts, reputation
JEL Classification: C73, D23, L14, O12
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
By Joel Watson
By Jonas Hjort