HIRSCHMAN MEETS WILLIAMSON: RELATIONSHIP-SPECIFIC INVESTMENT AND LOYALTY Cover Image

HIRSCHMAN MEETS WILLIAMSON: RELATIONSHIP-SPECIFIC INVESTMENT AND LOYALTY
HIRSCHMAN MEETS WILLIAMSON: RELATIONSHIP-SPECIFIC INVESTMENT AND LOYALTY

Author(s): Károly Mike
Subject(s): Social Sciences
Published by: Budapesti Corvinus Egyetem Szociológia Doktori Iskola
Keywords: loyalty; exit; voice; embeddedness; relationship-specific investment

Summary/Abstract: In Albert Hirschman’s theory, loyalty plays a key role in the equilibrium between exit and voice. This article extends economic (rational choice) analysis to the emergence of loyalty, which Hirschman considers an exogenous factor. This is accomplished by linking Williamson’s theory of specific investment to Hirschman’s model. Three cases are distinguished: (1) loyalty is due to specific investment; (2) loyalty is due to (intermediate) factors influenced by specific investment; and, (3) loyalty is independent of specific investment. A simple model formalizes the first case. A paradoxical dynamic of loyalty is identified: a lower degree of specificity may lead to a weakening of loyalty in the short run but a strengthening of loyalty in the long run. An application to the process of European integration is sketched.

  • Issue Year: 3/2012
  • Issue No: 2
  • Page Range: 55-81
  • Page Count: 27
  • Language: English
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