Dore, Ronald. 1983. "Goodwill and the Spirit of Market Capitalism." British Journal of Sociology 34:459-482.


Goodwill is more status neutral, defined as "the sentiments of friendship and the sense of diffuse personal obligation which accrue between individuals engaged in recurring contractual economicc exchange.

In Japan one part of the textile industry was going back to a fragmented state from prior use of large mills. Some reasons are that family enterprises are willing work for less than union wages. Others do it to evade taxes. Capital requirements for big mill technology is another. Another is wider diffusion of management skills making family business more profitable.

In Japan there is more relational contracting, more of a marraige between buyer and seller. Trading relations and personal relations are intermingled.

The basic principles of this relational contracting are that:

* bad times and good times should be shared

* moderation is use of the power relationship

* ethics are institutionalized

Thus trade is neither through the market nor through vertical integration. It seems to be part of the national culture. Relational contracts seem to help reduce risk through mutual association, more long-term and short-term strategy. In Japan benevolence is a duty. Japanese dont feel comfortable in adversarial bargaining relationships.

Its hard to say whether relational contracting is ultimately efficient. Its stability does allow greater investment between trading firms (or between employer and employee). Relations does speed up the flow if information. It also seems to improve quality through mutual obligation. Thus the Japanese system may have some x-efficiency advantages which compensate for allocative inefficiencies.

Relational contracting is a product of affluence, of moral evolution.