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 mechan isms 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.