Abstract
The purpose of this study is to analyze the influences of transaction factors on inter-firms relationships in different businesses. The study focuses on the comparison between the Chinese and Egyptian business with regarding to buyer and seller relationships in textile industry in order to find out the differences in buyer-seller relationships between Egypt and China and how the cultural factors influence the contracting practice between these two countries. Therefore, transaction cost analysis (TCA), relational contracting theory (RCT) and resource dependence theory (RDT) would act as the important tools to find out how the business relationship works in different culture background. Combining the three theories, we can conclude the general view about the transaction mechanism in the two countries. Chinese market situation, weak legal system and informal institutions combining with the “guanxi” embedded business environment make the Chinese small firms rely on the relational contracting more than formal contracting. Meanwhile, the high value for law makes Egyptians prefer to formal contracting. The findings highlight the fact that the level of contracting mechanism was found to be more positive in Egypt than in China and was statistically significant. In other words, the Egyptians tend to use the formal transactional mechanisms which emphasize legal conditions and incentive systems, whereas the Chinese prefer the relational mechanisms that govern exchanges through moral control and trust in the relationships between the buyers and suppliers. A hierarchical multiple regression approach employing the OLS regression model was carried out and the findings show that almost 30% of contracting mechanisms can be explained by the model, while the remaining percentage (70%) can be explained by other factors not included in the research model. In addition, the findings revealed that the association between supplier specific investments and contracting becomes significantly more enforced in Egypt than in China when the size of the buying firm increases. Furthermore, contracts have a control effect on buyer-supplier relationships in case of unanticipated eventualities.
Highlights
The textile industry has made significant contributions to industrial development in the history of human beings
A hierarchical multiple regression approach employing the OLS regression model was carried out and the findings show that almost 30% of contracting mechanisms can be explained by the model, while the remaining percentage (70%) can be explained by other factors not included in the research model
H1 The level of contracting is significantly higher in Egypt than in China
Summary
The textile industry has made significant contributions to industrial development in the history of human beings. Textile is used in the clothing we wear, but it influences the interior and exterior decoration and significantly changes the appearance of our living spaces. It is utilized as high-tech materials in sports, leisure, aircraft, automotive, computer, civil construction, engineering, medicine and etc. In 2016, despite global economic depression and the low level of market demand, the Chinese textile industry achieved steady growth throughout last year. It focused on the further transformation and upgrading, actively implementing structural reforms, stable profitability as well as the continuous improvement of operational quality. The cost burden of enterprises is still heavy and the industry is facing greater pressure for developing [1]
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