What makes one company's relationship with another company more ACR (or more OCR) than another's? What explains the variations in the mode of customer—supplier relationships as discovered empirically and described in the previous chapters? This and the following four chapters provide a systematic analysis of factors underlying companies' choice of trading relationships along the ACR-OCR spectrum.

The present chapter concentrates on those factors which have traditionally preoccupied economists. In theory, the assessment of these factors must be carried out on a ceteris paribus basis, assuming that the surrounding national institutions, people's value preferences and social norms are the same for all. In reality, other things are not equal, while various factors may be subject to multiple and two-way links (see Figure 1.1). This chapter deals in the main with the direct effects of economic and technological factors on the ACR—OCR patterns, while being sensitive to two-way causation. The first section concentrates on technology. In particular, we will examine how inter-industry differences in various types of ‘asset specificity’ and product-development cycles affect the nature of customer—supplier relationships. We will then turn to the importance of market conditions, in particular market structures, the nature of competition, and the pace of economic growth which shape companies' expectations about the future of existing trading relationships. Five propositions are put forward in the course of the chapter.