A Matter of (Relational) Style: Loan Officer Coherence and Consistency in Contract Enforcement in Microfinance*

participants at Chicago, HBS, NYU, and Yale for their feedback on an earlier draft. All errors and omissions are ours alone. Please send any feedback or questions to: Jason Greenberg at: Abstract Social scientists have long considered what mechanisms underlie repeated exchange. Three mechanisms have garnered the majority of this attention: Formal contracts, relational contracts, and embedded social ties. Although each mechanism has its virtues, all three exhibit a common limitation: An inability to fully explain the continuation of inter-temporal exchange between individuals and organizations in the face of change. Drawing on extensive quantitative data on approximately 450,000 microfinance loans made by an MFI in Mexico from 2004-2008 that include random assignment of loan officers, this research proposes the concept of " relational styles " to help explain how repeated exchange is possible in the face of change. We define relational styles as systematically reoccurring patterns of interaction employed by social actors within and across exchange relationships-in this paper, between microfinance clients and loan officers. Findings support our arguments that social actors care about the relational styles of their counterparties in an exchange. More specifically, we show that relational styles that are coherent facilitate a clear understanding of expectations and thus exchange. We also demonstrate that consistency in the relational styles followed by successive exchange counterparties mitigates the negative impact of change, like a broken personal tie. Theoretical implications and extensions are discussed.