Relational exchanges versus arm’s-length transactions during institutional transitions

We acknowledge that there is a fundamental debate regarding whether the direction of Peng’s (2003) two-stage framework of institutional transitions toward more market-based, arm’s-length transactions—while consistent with numerous other scholars such as North (1990) and many international organizations such as the World Bank (2002)—is plausible. While engaging in this debate is outside the scope of our article, interested readers may consult Biggart and Delbridge (2004), Carney, Gedajlovic, and Yang (2009), Crouch (2005), and Hall and Soskice (2001) for the diversity of alternative systems of exchange other than those suggested by North (1990), Peng (2003), and the World Bank (2002). In addition, it is important to note that Peng (2003: 282) writes that the move toward more arm’s-length transactions “does not necessarily mean that arm’s-length transactions are inherently better, because in many situations the demand for new and modern institutions may not be evident.”