Hostname: page-component-cd9895bd7-jn8rn Total loading time: 0 Render date: 2024-12-27T11:29:25.186Z Has data issue: false hasContentIssue false
  • English
  • Français

Markets and Corporate Conflict: A Substitution-Cost Approach to Business Litigation

Published online by Cambridge University Press:  27 December 2018

Jacob E. Gersen
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper examines the phenomenon of conflict escalation in business relations. A theory of when conflict between firms will proceed from informal relationship-preserving norms to more formal and destructive end games involving litigation is developed and tested. The central theoretical claim is that substitution costs serve as an impediment against the escalation of conflict. Data on market concentration and dollar flows between aggregate markets in the economy are used to develop measures of substitution costs. Measures of substitution costs and trade figures are also used to describe power advantages in markets. The theory is tested through a series of regression models. The main findings are that (1) when substitution costs are high, parties are less likely to escalate conflict and (2) asymmetric market relations result in less conflict escalation than symmetric ones. Empirical analysis indicates that substitution costs are related in predictable and meaningful ways to conflict escalation and business litigation.

Type
Student Prize Winner
Information
Law & Social Inquiry , Volume 24 , Issue 3 , Summer 1999 , pp. 589 - 609
Copyright
Copyright © American Bar Foundation, 1999 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Bernstein, Lisa. 1992. Opting Out of the Legal System: Extralegal Contractual Relations in the Diamond Industry. Journal of Legal Studies 21:115–57.Google Scholar
1996. Symposium: Law, Economics, and Norms: Merchant Law in a Merchant Court: Rethinking the Code's Search for Immanent Business Norms. University of Pennsylvania Law Review 144:1765–821.Google Scholar
Burt, Ronald S. 1988. The Stability of American Markets. American Journal of Sociology 94:356–95.Google Scholar
1992 Structural Holes. Cambridge, Mass.: Harvard University Press.Google Scholar
1998. Market Dataset. Available from http://gsbwww.uchicago.edu/fac.ronald.burt/research.Google Scholar
Carver, Todd B., and Albert, A. Vondra. 1994. Alternative Dispute Resolution: Why It Doesn't Work and Why It Does. Harvard Business Review 1994 (May-June):120–30.Google Scholar
Cheit, Ross. 1990. Patterns of Contemporary Business Litigation in Rhode Island. Paper presented at the Law and Society Association Annual Meeting, Berkeley, Calif.Google Scholar
Cliff, Andrew D., and Keith Ord, J. 1973. Spatial Autocorrelation. London: Pion.Google Scholar
Cook, Karen S., and Yamagishi, Toshio. 1992. Power in Exchange Networks: A Power-Dependence Formulation. Social Networks 14:245–65.Google Scholar
Dunworth, Terence, and Nicholas, M. Pace. 1990. Statistical Overview of Civil Litigation in the Federal Courts. Santa Monica, Calif: Rand Corporation.Google Scholar
Dunworth, Terence, and Rogers, Joel. 1996. Corporations in Court: Big Business Litigation in U.S. Federal Courts, 1971–1991. Law and Social Inquiry 21:497–592.Google Scholar
Esser, John P. 1996. Institutionalizing Industry: The Changing Forms of Contract. Law and Social Inquiry 21:593–629.Google Scholar
Galanter, Marc, and Charles, R. Epp. 1992. A Beginner's Guide to the Litigation Maze. Business Economics 27:33–38.Google Scholar
Galanter, Marc, and Rogers, Joel. 1991. The Transformation of American Business Disputing: Some Preliminary Observations. Disputes Processing Research Program (DPRP) Working Paper#10-3. Madison: University of Wisconsin.Google Scholar
Givens, Richard. 1989. Business Torts and Competitive Litigation. Colorado Springs, Colo: McGraw-Hill Information Services.Google Scholar
Goodchild, Michael F. 1986. Spatial Autocorrelation. Norwich, Conn: Geo Books.Google Scholar
Johnston, Jason Scott. 1996. Law, Economics, and Norms: The Statute of Frauds and Business Norms: A Testable Game-Theoretic Model. University of Pennsylvania Law Review 144:1859–1912.Google Scholar
Kauffman, Patrick J., and Louis, W. Stern. 1989. Relational Exchange Norms, Perceptions of Unfairness, and Retained Hostility in Commercial Litigation. Journal of Conflict Resolution 32:534–52.Google Scholar
Kenworthy, Lane, Macaulay, Stewart, and Rogers, Joel. 1996. The More Things Change …: Business Litigation and Governance in the American Automobile Industry. Law and Social Inquiry 21:631–78.Google Scholar
Krackhardt, David. 1987. QAP Partialling as a Test of Spuriousness. Social Networks 9:217–24.Google Scholar
1988. Predicting with Networks: Nonparametric Multiple Regression Analysis of Dyadic Data. Social Networks 10:359–81.Google Scholar
Kreps, David M. 1990. A Course in Microeconomic Theory. Princeton, N.J.: Princeton University Press.Google Scholar
Lincoln, James R. 1984. Analyzing Relations in Dyads. Sociological Methods and Research 131:45–76.Google Scholar
Macaulay, Stuart. 1963. Non-contractual Relations in Business: A Preliminary Study. American Sociological Review 28:55–67.Google Scholar
McIntosh, Wayne V. 1990. The Appeal of Civil Law: A Political-Economic Analysis of Litigation. Urbana: University of Illinois Press.Google Scholar
Miller, David. 1992. Predicting Power in Exchange Networks: A Brief History and Introduction to the Issues. Social Networks 14:187–211.Google Scholar
Munger, Frank. 1986. Commercial Litigation in West Virginia State and Federal Courts 1870–1940. American Journal of Legal History 30:322–49.Google Scholar
Png, I. P. L. 1983. Strategic Behavior in Suit, Settlement, and Trial. Bell Journal of Economics 14:539–50.Google Scholar
Priest, George L., and Klein, Benjamin. 1984. The Selection of Disputes for Litigation. Journal of Legal Studies 13:1–55.Google Scholar
Ryll, Wolfgang. 1996. Litigation and Settlement in a Game with Incomplete Information. Berlin: Springer.Google Scholar
Schweizer, Urs. 1989. Litigation and Settlement under Two-Sided Incomplete Information. Review of Economic Studies 56:163–77.Google Scholar
Shavell, Steven. 1995. Alternative Dispute Resolution: An Economic Analysis. Journal of Legal Studies 24:1–28.Google Scholar
Williamson, Oliver E. 1984. The Economic Institutions of Capitalism. New York: Free Press.Google Scholar
Williamson, Oliver E. 1996. The Mechanisms of Governance. New York: Oxford University Press.Google Scholar