Judicial Process Effectiveness and Supply Chain Allocation:Evidence from the Reform of the Division Between Complex and Simple Cases
This study examines how improved effectiveness of judicial proceedings influences firms'supply chain allocation decisions.Using the pilot reform of the division between complex and simple cases as a natural experiment,it finds that firms adopt a more market-oriented supply chain strategy after the reform,as evidenced by the significant reduction in supply chain concentration.On the other hand,the primary mechanism it identifies involves enhancing the efficiency and quality of supply chain-related litigation,which drives firms to transition from relationship-based to market-based contracts.These effects are particularly pronounced in firms that previously faced higher contract enforcement costs,operated in industries with a higher potential for market-based transactions,and were located in cities with lower levels of social trust.In conclusion,this paper demonstrates that improving the effectiveness of judicial proceedings enables firms to better leverage market-based transactions in their supply chain configurations.
judicial processreform of the division between complex and simple casessupply chain concentrationbusiness environment