This paper studies the role of agency in the self-enforcement of interfirm contracts. When interfirm transactions are carried out by the agents rather than the owners, the agents' incentive to breach a contract for the benefit of their firm is typically lower than that of the owners if doing so...

It has been taken for granted in the literature on the determinants of vertical integration that the effectiveness of contract enforcement is guaranteed, which is far from true even in some developed countries. In this paper, using a World Bank data set of manufacturing firms in China, we...