Contract Law, Relational Contracts, and Reputational Networks in International Trade: An Empirical Investigation into Cross-Border Contracts in the Software Industry


Thomas Dietz is a Research Fellow at the Institute of European and Comparative Law at the University of Oxford. His research focuses on the institutional foundations of global markets. The research for this article was conducted at the Collaborative Research Centre 597 “Transformations of the State” at the University of Bremen. Generous financial support was provided by the German Research Foundation (DFG). Within the framework of the Collaborative Research Centre 597 the interviews presented in this article were conducted together with Holger Nieswandt. A first draft of the article was discussed at the Annual Meeting of the Law and Society Association, May 28–31, 2009, in Denver, and a revised version of the article was discussed at the 22nd SASE Annual Meeting, June 24–25, 2010, in Philadelphia. I am particularly thankful to Terence C. Halliday, Errol Meidiger, Peer Zumbansen, Gregory Shaffer, Gralf Peter Calliess, Josh Whitford, Susanne K. Schmidt, Christian Joerges, Mauro Zamboni, Jörg Freiling, Andreas Maurer, and Gillian K. Hadfield for their comments. Please direct correspondence to


The following case study investigates the contract enforcement institutions that enable German customers to purchase software in Asia and Eastern Europe. The case study shows that nation-states are hardly able to generate a legal “shadow” for cross-border business relations. The same holds true for the so-called New Lex Mercatoria. Instead, economic actors create their own informal mechanisms. Relational contracts and reputational networks are nowadays far more effective due to developments in the field of information and communication technology. Overall, the importance of formal contract law in international trade is even smaller than is assumed by the classic theory of relational contracts.