The author thanks Ronald Burt for allowing him to use his measures of market organization, David Krackhardt for advice on estimating statistical significance with the pitfalls of network data, and Ross Cheit for motivating his interest in the topic. Helpful comments were provided by Christopher Berry, Michael Neblo, Steven Puro, participants in the American Politics Workshop at the University of Chicago, and an anonymous reviewer. A version of this paper was presented at the 1999 Midwest Political Science Association Convention (April 1999). Financial support was provided by the National Science Foundation in the form of a NSF Graduate Research Fellowship. Ali errors are solely the responsibility of the author.
Markets and Corporate Conflict: A Substitution-Cost Approach to Business Litigation
Article first published online: 28 JUL 2006
Law & Social Inquiry
Volume 24, Issue 3, pages 589–609, July 1999
How to Cite
Gersen, J. E. (1999), Markets and Corporate Conflict: A Substitution-Cost Approach to Business Litigation. Law & Social Inquiry, 24: 589–609. doi: 10.1111/j.1747-4469.1999.tb00142.x
- Issue published online: 28 JUL 2006
- Article first published online: 28 JUL 2006
This paper examines the phenomenon of conflict escalaton 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.