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This study focuses on the mechanisms of contract enforcement and dispute resolution in the trade of timber in Shanghai from the 1880s to the 1930s. It shows that merchant guilds, chambers of commerce, and the court system constituted complementary institutions of contract enforcement. Timber trade guilds relied on reputation mechanisms and information sharing to maintain intra-group solidarity and monitor outside trading partners. Horizontal communications among timber guilds in different localities further enhanced their capability to respond promptly to cross-regional cases. When disputes escalated beyond the scope of a single merchant guild, chambers of commerce (after 1904) and the court system became involved. Vertical communications among these organizations strengthened the continuity from informal norms of business practices to guild regulations, and thence to adjudications in court. Whereas the typical story, drawn from European history, was one of transition toward more formal institutions, this case study shows that formal and informal institutions could complement each other and that they existed along a continuum rather than in separated spheres. The convergence of the expected outcomes as a result of resorting to different platforms of dispute resolution reinforced the consistency and credibility of the cost of defaulting.
Meng Zhang. “Timber Trade Organizations in Shanghai: Institutions, Enforcement, and Dispute Resolution, 1880-1930.” International Journal of Asian Studies, vol. 14, no. 2, July 2017, p. 143-70.