In 1998, the economist Christopher Woodruff published a study of Mexico’s footwear industry in the journal World Development. He studied the trade between shoe manufacturers and retailers. “Informal institutions govern the majority of interfirm transactions,” he found. “Even for new customers, manufacturers did not normally demand any payment at the time the order was placed.” Their order forms were not recognized by the courts as legally enforceable contracts.
Woodruff also found that the opening of trade changed the balance. “By providing an alternative source for procurement, trade liberalization weakened the power of manufacturers.”