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Starting small in an unfamiliar environment

Author: James E Rauch; Joel Watson; National Bureau of Economic Research.
Publisher: Cambridge, MA : National Bureau of Economic Research, ©1999.
Series: Working paper series (National Bureau of Economic Research), working paper no. 7053.
Edition/Format:   eBook : Document : EnglishView all editions and formats
Summary:
Abstract: Motivated by a characteristic way in which firms in developed countries make their decisions regarding cooperation with potential partners from less developed countries, we design a simple model of a DC firm's search for an LDC partner/supplier and the subsequent relationship between the two parties. Matched firms can start small' with a trial order or pilot project of variable size in order to gain  Read more...
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Additional Physical Format: Print version:
Rauch, James E.
Starting small in an unfamiliar environment.
Cambridge, MA : National Bureau of Economic Research, ©1999
(OCoLC)41619182
Material Type: Document, Internet resource
Document Type: Internet Resource, Computer File
All Authors / Contributors: James E Rauch; Joel Watson; National Bureau of Economic Research.
OCLC Number: 646854854
Reproduction Notes: Electronic reproduction. [S.l.] : HathiTrust Digital Library, 2010. MiAaHDL
Description: 1 online resource (31, [2] pages) : illustrations.
Details: Master and use copy. Digital master created according to Benchmark for Faithful Digital Reproductions of Monographs and Serials, Version 1. Digital Library Federation, December 2002.
Series Title: Working paper series (National Bureau of Economic Research), working paper no. 7053.
Responsibility: James E. Rauch, Joel Watson.

Abstract:

Abstract: Motivated by a characteristic way in which firms in developed countries make their decisions regarding cooperation with potential partners from less developed countries, we design a simple model of a DC firm's search for an LDC partner/supplier and the subsequent relationship between the two parties. Matched firms can start small' with a trial order or pilot project of variable size in order to gain information about the ability of the LDC firm to successfully carry out a large project. We derive results relating whether and how the parties start small to the characteristics of the large project and to the matching environment. Among other results, we show how risk and search cost are associated with the propensity to start small and we establish a connection between starting small and the expected longevity of successful partnerships. We also address methods of contract enforcement and demonstrate the relationship between starting small and monitoring.

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