Question

relationship-specific investments are investments that: create seller-to-seller training programs. increase your bargaining power. are worth more in the context of a specific business relationship. contractually obligate a business partner to continue working with the investor.

Answer 1

The relationship-specific investments are investments that are worth more in the context of a specific business relationship.

What are relationship-specific assets?

The defining characteristic of relationship-specific assets is that they are more valuable when used in a relationship than when used alone. An example of this is when an upstream supplier invests in her product to make it more suited to the needs of the downstream consumer. By facilitating investment between purchasers and suppliers of intermediate goods that is relationship-specific, banks help the economy flourish.  

Relationship investments are described by Williamson's transaction cost theory of 1985 as the extent to which assets are devoted to a specific relationship producing a lock-in scenario for the investing party in inter-organizational relationships. Meanwhile, the relationship-specific investments, in Crawford's words, are those "whose rewards depend on the continuation of the relationship."

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