A note on countertrade : contractual uncertainty and transaction governance in emerging economies

This paper develops a conceptual framework for analyzing organizational responses to contractual uncertainty in the context of emerging economies. Elaborating on Hennart's (1989) transaction cost rationale for countertrade, we develop a typology of exchange and transaction governance pertinent to the study of emerging economies: Contract, trust and hostage. Notwithstanding the traditional explanation based on foreign exchange shortage, we argue that the persistence of international countertrade illustrates organizational remedies to institutional deficiency in transaction governance.