How do firms combine a broad range of contract enforcement mechanisms into coherent governance structures? How often are distinct structures used in an economy? We develop a new empirical approach, based on latent class analysis, to answer these questions. Economy-level data from Hungary are used to derive a data-driven typology of contractual governance between firms. The joint use of law, morality, self-enforcing contracts, reputation and community norms is examined. They are shown to be combined into bilateral, third-party or comprehensive governance structures. The crucial governance choice is whether to move beyond bilateralism and, if yes, whether to use a mixture of (formal and informal) third-party mechanisms as a substitute or a complement. Complementarity is much more common. We find no instances of ‘impersonal exchange’; the law never stands alone. By implication, economic development may be best understood as a process from a narrower towards a broader set of enforcement mechanisms.

No abstract

Not only do ideas matter in economic development but so do the institutions of intellectual debates in which ideas are formed. Scholars usually point to intellectual debates whose institutions are largely exogenous to the economy (e.g. those of religion or science). I suggest that economists should also consider intellectual debates that are initiated by economic actors. I set out to understand the role of intellectual debate in the economy and, drawing on Polanyi's concept of ‘intellectual order’, the institutions that emerge endogenously to support it. Professional communities and public intellectual spheres are shown as the most important examples. Three historical cases are given as illustrations. I conclude that these intellectual orders should be included among the fundamental ‘institutions of capitalism’, along with the catallactic institutions of property and contract.

Abstract:What do collective reputation and communal pastures have in common? Collective reputation is an important type of collective good produced by many business networks. We argue that it has the structure of a commonpool resource, which points to the relevance of Elinor Ostrom's theory about the community governance of natural common-pool resources. After adapting the Ostromian framework to the phenomenon of collective reputation, we explore the experience of two groups of winemaking enterprises in Hungary who set up systems of quality assurance in order to protect and improve their joint reputation. We examine if the conditions identified by Ostrom as favourable for the self-governance of commons are also conducive to the governance of collective reputation. Our findings validate our conjecture that research on goal-oriented business networks may use insights from the mature theory of 'governing the commons'. Potential pathways for further research are outlined.