Seller beware: International transactions require much more than a contract

Suppose China wants to buy microprocessors from the United States. The two countries sign a contract—and then the United States hopes that China, as the buyer, holds up its end of the bargain. (One could say the same for China, by the way.) One might think that a contract spelling out in detail the terms of sale and delivery would eliminate the chance that the buyer would violate those terms. A new study in the Journal of International Marketing, however, suggests that well-specified contracts are effective in reducing violations on the part of the buyer only if the buyer is a country that is highly globalized or whose business environment is a low-risk one.

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