banks systematic risk and industrial concentration theory and evidence abstract we find evidence in an international cross section that bank based financial systems and various measures of vulnerability to real exchange rate fluctuations are highly significant macroeconomic determinants of industrial concentration we argue that these results can be explained by bank risk management practices asymmetric contracts make it impossible for banks to protect themselves against systematic risk e g real exchange rate fluctuations by diversifying across borrowers managing the risk requires instead that banks lend to already diversified borrowers who internalize losses and gains from a shock

the acquisition of fisher body by general motors abstract it is commonly said that in 1926 general motors was led to acquire its supplier of automobile bodies fisher body because fisher body held up general motors it is claimed that fisher body did this by locating its body plants far away from the general motors assembly plants and by adapting inefficient methods of production thus increasing both the cost of producing bidies and the profits of fisher body under its cost plus contract this tale is factually incorrect what general motors acquired in 1926 was the 40 percent of the shares of fisher body that it did not already own furthermore fisher body did not locate its plants far away from the general motors assembly plants it is also most implausible for many reasons that the fisher brothers would have used inefficient methods of production there is no evidence that a holdup occurred

national cultural distance and cross border acquisition performance previous theoretical research has argued that national cultural distance hinders cross border acquisition performance by increasing the costs of integration this article tests the alternative hypothesis that national cultural distance enhances cross border acquisition performance by providing access to the target s and or the acquirer s diverse set of routines and repertoires embedded in national culture using a multi dimensional measure of national cultural distance and controlling for other effects we examine a sample of 52 cross border acquisitions that took place between 1987 and 1992 and find a positive association between national cultural distance and cross border acquisition performance

price formats for branded components in industrial markets an integration of transaction cost economics and the resource based view in this paper we propose an approach to show how the capability based perspective of the resource based view of the firm can be integrated with the comparative governance approach of transaction cost economics to shed light on governance issues in interfirm relationships we argue that transacting parties create value not only through the employment of partner specific investment and coordination activities but also through the employment of heterogeneous firm specific resources that each firm brings to the relationship and that in turn governance structures reflect a discriminating alignment with these two distinct forms of value creating activities and resources our thesis is empirically tested in the context of industrial original equipment manufacturers employing branded component contracts with independent component vendors specifically we investigate the conditions under which the price terms for branded components are agreed upon more fixed ex ante versus negotiated more flexible ex post our results offer two insights first the chosen governance form reflects a trade off between safeguarding and adaptation motives even among parties engaged in cooperative relationships second valuable firm specific resources that preexist outside of the exchange relationship are at stake in these cooperative yet contractually incomplete relationships they together with relationship specific investments and activities have a significant impact on governance design

the role of market forces in assuring contractual performance the conditions under which transactors can use the market repeat purchase mechanism of contract enforcement are examined increased price is shown to be a means of assuring contractual performance a necessary and sufficient condition for performance is the existence of price sufficiently above salvageable production costs so that the nonperforming firm loses a discounted steam of rents on future sales which is greater than the wealth increase from nonperformance this will generally imply a market price greater than the perfectly competitive price and rationalize investments in firm specific assets advertising investments thereby become a positive indicator of likely performance

hotel outsourcing under asset specificity the good the bad and the ugly abstract this paper presents three case studies developed to investigate outsourcing outcomes in the tunisian hotel industry the paper applies a transaction cost economics tce logic to examine potential contracting problems stemming from hotel outsourcing under asset specificity conditions working within the tradition of post positivism we find case study evidence of significant falsification value regarding tce propositions on the performance consequences of unilateral and bilateral relation specific investments and their holdup potential our insights have important practical implications for the management of hotel outsourcing relationships characterized by high asset specificity

the role of key stakeholders in the international joint venture negotiations case studies from eastern europe recent literature has suggested that a key stakeholder may be able to shift the balance of bargaining power during a joint venture negotiation and thus change the outcome of the process this paper explores the role of central and eastern european transitional governments as key stakeholders and how they influence international joint venture negotiations this role is described and analyzed by examining eight dyads of western european and central eastern european enterprises that have recently negotiated agreements the findings suggest that transitional governments as key stakeholders intervene at different stages of the negotiation process have both direct and indirect influences on the process and that they can change the balance of power in the negotiations sometimes to the detriment of their own state owned enterprise

political economic context and sensitivity to equity differences between the united states and the transition economies of central and eastern europe recent labor economics studies suggest that low enterprise productivity in former socialist economies can be corrected by adopting reward systems emphasizing compensation for performance we used t

pretia ex machina prices and process in long term contracts aimong the primary motives for writing contracts identified in both the law and economics literatures is the desire to protect against the hazards inherent to exchange where one or both parties have invested in reliance or relationship specific assets in support of the transaction because such investments have a higher value in their intended than in their next best use parties have an incentive to engage in haggling or other forms of opportunism in hopes of influencing the distribution of the resulting quasi rents contracts promote efficiency by securing the distribution of those rents ex ante thereby avoiding costly repetitive bargaining over the terms of trade and reducing the risk for each party of relying on the performance of the other in reality this description of the role and functioning of contracting is oversimplified as a number of legal and economic scholars have emphasized contracts are not the precise mechanically enforced documents often encountered in economic theory 2 indeed contracts are extremely

building international business theory a grounded theory approach the field of international business ib is in need of more theory development as such the main focus of our manuscript was to provide guidance on how to build ib specific theory using grounded theory gt moreover we contribute to future theory development by identifying areas within ib where gt can be applied and the type of research issues that can be addressed using this methodology finally we make a noteworthy contribution by discussing some of gt s caveats and limitations particularly those relevant to ib this effort is intended to spur further interest in the development of ib theory

relational contracts and the theory of the firm relational contracts informal agreements sustained by the value of future relationships are prevalent within and between firms we develop repeated game models showing why and how relational contracts within firms vertical integration differ from those between nonintegration we show that integration affects the parties temptations to renege on a given relational contract and hence affects the best relational contract the parties can sustain in this sense the integration decision can be an instrument in the service of the parties relationship our approach also has implications for joint ventures alliances and networks and for the role of management within and between firms

surveying the economics of plural modes of organization why do firms concomitantly rely on more than one organizational arrangement to procure distribute a given input product in this paper we systematically review and discuss the extensive path undergone by the literature exploring this issue the so called plural forms we address two main questions how to explain the coexistence and often the prevalence of plural forms in many types of businesses are plural forms stable or a transitory phenomenon we describe the most prominent motivations identified in the economics and management literature that drive firms to adopt plural forms and show that their vast majority are related to the mitigation of various types of agency transaction costs we also demonstrate that most of the available pieces of empirical evidence suggest the stability of plural forms over time we conclude by demonstrating the path that has been trailed by the most recent developments

strategic default in the international coffee market this article studies strategic default on forward sale contracts in the international coffee market to test for strategic default we construct contract specific measures of unanticipated changes in market conditions by comparing spot prices at maturity with the relevant futures prices at the contracting date unanticipated rises in market prices increase defaults on fixed price contracts but not on price indexed ones we isolate strategic default by focusing on unanticipated rises at the time of delivery after production decisions are sunk and suppliers have been paid estimates suggest that roughly half of the observed defaults are strategic we model how strategic default introduces a trade off between insurance and counterparty risk relative to indexed contracts fixed price contracts insure against price swings but create incentives to default when market conditions change a model calibration suggests that the possibility of strategic default causes 15 8 average losses in output significant dispersion in the marginal product of capital and sizable negative externalities on supplying farmers

how private contract enforcement mechanisms can succeed where public institutions fail the case of juhocukor a s the enforcement of contracts is necessary for efficient exchange and investment in economic activities contracts can be enforced through a variety of mechanisms both public and private however in many developing and transitional countries these public institutions are either absent or ineffective in ensuring contract enforcement under such conditions private enforcement mechanisms may provide a suitable replacement for public enforcement institutions this may be done externally through a third party or internally through self enforcing agreements this paper analyzes the use of self enforcing arrangements or internal private enforcement mechanisms using a case study of an agri business in a transition economy juhocukor a s a slovakian sugar processor we show that the use of internal private contract enforcement mechanisms can have a significant positive effect on output and efficiency for both partners to the exchange transaction in an environment characterized by the absence or ineffectiveness of public enforcement institutions 2000 elsevier science b v all rights reserved

brand names ignorance and quality guaranteeing premiums recent literature contains several theories of how self enforcing agreements rely on repeat purchase mechanisms to ensure product quality some have suggested the use of advertising as a signal of future actions in such games this article extends these recent studies for the case where firms face temporary changes in cost or demand curves and offers an initial attempt at providing a statistical test of the klein leffler model it is found that the deviations in the advertising sales ratio from the levels that can be explained by industry specific characteristics are consistently contrary to what their model predicts these results hold over a very wide range of depreciation rates for advertising and for the many individual industries examined the results are only weakly affected when the presence of measurement error is explicitly recognized

do country level institutional frameworks and interfirm governance arrangements substitute or complement in international business relationships interfirm relationships among partners from institutionally distant environments are subject to governance difficulties owing to the paucity of shared cognitive and regulatory frameworks we examine the potential of formal contracting and relational governance developed at the partnership level to overcome the formal and informal institutional gap at the country level empirical results from a sample of 184 international partnerships of large us firms support an overall substitutive relationship between informal institutional frameworks and interorganizational relational arrangements whereby the performance benefits of relational governance are reinforced at higher degrees of informal institutional distance contrastingly formal institutional frameworks and contractual governance are found to have a complementary relationship with performance gains from formal contracting undermined at higher degrees of formal distance

long term sustainability of third party facilitated market linkages evidence from the usda marketing assistance program in the armenian dairy industry abstract public private partnerships are increasingly seen as an important tool to build agri food supply chains and develop markets for agri food products in emerging economies however many of these initiatives fail when the public component of the program ends one exception is the usda market assistance program map that facilitated the redevelopment of the armenian dairy sector after privatization this paper presents a case study of this initiative and hypothesize that the usda map facilitated farmer investment in private enforcement capital this investment resulted in sustainable market relationships between farmers and dairy processors even after the usda map expired we find empirical evidence to support this hypothesis using a panel dataset collected from 172 armenian dairy farmers in 2004 and 2009

varieties of entrepreneurship exploring the institutional foundations of different entrepreneurship types through varieties of capitalism arguments while entrepreneurship researchers agree that institutions matter for entrepreneurship they also have a rather encompassing understanding of institutions as almost any external factor that influences entrepreneurship ultimately this literature thus comes up with a long list of institutional factors that may explain entrepreneurial differences between countries but which institutions are most influential how do these institutions relate to different types of entrepreneurship and to what extent are institutions complementary to each other in the way they sustain different entrepreneurship types the literature on varieties of capitalism voc offers a parsimonious theoretical framework to address these questions based on the voc literature we theoretically derive a consistent set of institutional indicators that can explain differences in entrepreneurship types between countries based on principal component and cluster analyses we illustrate how 21 western developed economies cluster around four distinct institutional settings furthermore we use simple ols regressions to show how these institutional constellations are related to different types of entrepreneurship we conclude that four different varieties of entrepreneurship can be identified across the western world the main implication of our findings is that a perfect institutional constellation equally facilitating different types of entrepreneurship does not exist policy makers seeking to stimulate entrepreneurship are thus faced with the trade off of targeting policy reforms to that entrepreneurship type they intend to promote at the expense of other types of entrepreneurship and the broader societal consequences such reforms will have

hungarian western partnerships a grounded theoretical model of integration processes and outcomes international cooperative ventures icvs are known to be strongly influenced by the parent firms values practices and systems vpss however less clear is whether and why vpss actually adopted by an icv are those of either parent singly both parents jointly or neither parent this question is especially timely in the transition economies of central and eastern europe where cooperative activity with western multinationals is growing rapidly and where decades old legacies of communism abound in this exploratory study we used a multiple case study methodology to examine 17 hungarian western icvs results show that a majority of the icvs adopted the vpss of the western partner we develop a theoretical model of integration process and outcomes and suggest future research directions

contract enforcement social efficiency and distribution some experimental evidence we use economic experiments to investigate how different contract enforcement regimes affect efficiency and the distribution of surplus in a vertically coordinated market with buyer concentration we find that if a third party e g government perfectly enforces contracts social efficiency is enhanced we also find that when third party enforcement is imperfect social efficiency will not necessarily decrease because trading partners find ways to self enforce contracts however opportunistic behavior by some traders leaves some sellers growers with ex post profits below reservation levels finally partial or one sided third party enforcement causes significant efficiency losses by constraining subjects ability to use informal enforcement instruments

theorising from case studies towards a pluralist future for international business research the literature on case studies both in the field of international business ib and in the social sciences more generally has tended to focus on the methods of data production and analysis suited to this research strategy in contrast in this paper we investigate methods of theorising from case studies we seek to understand how case researchers theorise and how future ib research might utilise case studies for theorising by means of a qualitative content analysis of case studies published in journal of international business studies academy of management journal and journal of management studies we construct a typology of theorising from case studies two dimensions of the case study namely causal explanation and contextualisation form the basis for our typology we distinguish four methods of theorising inductive theory building interpretive sensemaking natural experiment and contextualised explanation only the first of which has been widely used in jibs in the period that we investigate on the basis of our own qualitative analysis we show the limitations of inductive theory building and argue that greater utilisation of the other methods of theorising would enhance the case study s explanatory power and potential for contextualisation we argue for a more pluralist future for ib research

understanding the differences in korean and u s executives strategic orientations competitive positioning in a global market requires an understanding of the decision processes and behavioral attributes of executives from different countries these attributes reflect the executives cultural background the national policies under which they have worked and their home country s level of economic development institutional context the current research compared strategic decision models of u s and korean executives and the results suggest that criteria employed by the executives from the two countries differ differences in institutional context between korea and the u s a were reflected in the weightings of objective criteria used by the executives korean executives emphasized industry attractiveness sales and market share because of policies that encourage growth and u s executives emphasized projected demand discounted cash flow and roi because of policies and institutions that focus on profitability the results suggest the importance of understanding the strategic orientations of international competitors partners in international strategic alliances and managers of international subsidiaries or divisions 1997 by john wiley sons ltd

how green is your scheme greenhouse gas control the australian way australia managed to pass a national carbon pricing scheme into legislation in november 2011 which has come into effect from july 2012 the scheme includes elements of a co2 equivalent tax as a short prelude to emission trading several fundamental problems remain unaddressed including the continuing rise of emissions the scale of growth and economic activity the promotion of emission trading subsidies to polluters the hidden promotion of banking and finance sectors the new policy appears primarily targeted at job creation and business as usual we argue that the prospects for any meaningful reduction in emission levels are extremely unlikely

when are cartels stable contracts why do some industry cartels survive for decades while others are quickly undermined by price wars and entry variation in cartels longevity can be explained by differences in their costs of self enforcement and service value to members analyzing legal cartel contracts formed under the webb pomerene export trade act i find that longer lived cartels tended to export to small buyers to have wide industry coverage to operate in periods of stable prices and growing demand and to sell under side agreements with foreign competitors contracts in which the cartel centralized its control through a common sales agency tended to be more stable however cartels usually grew less stable with age and when there was a recent and long history of cartelization in the industry finally cartels whose primary rationale was to fix price tended to be particularly unstable because these contracts invited fringe competition and entry

complementarity status similarity and social capital as drivers of alliance formation using data on u s investment banking firms syndication in underwriting corporate stock offerings during the 1980s this study explores the factors that drive alliance formation between two specific firms we compare resource complementarity status similarity and social capital as a basis of alliance formation the findings indicate that the likelihood of investment banks alliance formation is positively related to the complementarity of their capabilities as well as their status similarity social capital arising from banks direct and indirect collaborative experiences also plays a very important role in alliance formation the number of deals given by a lead bank to a potential partner over the past three years has an inverted u shaped relationship to the probability that the lead bank will invite the potential partner to form an alliance our findings indicate that status similarity and social capital have a stronger effect on alliance formation in initial public offering deals than in secondary offering deals as the former are more uncertain than the latter using these findings we discuss the role of complementarity status similarity and social capital in alliance formation copyright 2000 john wiley sons ltd

why hold ups occur the self enforcing range of contractual relationships one of my most enjoyable intellectual experiences was working with armen alchian on the klein crawford and alchian 1978 hold up paper in this paper i extend the basic framework presented in that paper pointing out what i now consider to be its shortcomings and providing insights into the nature of hold ups and the form of contracts chosen by transactors to avoid hold ups the major analytical extension entails combining hold up analysis with my work on private enforcement because private enforcement capital is limited and written contract terms are necessarily imperfect transactors must optimally combine court enforced written terms together with privately enforced unwritten terms to define what i call the self enforcing range of their contractual relationship hold ups occur when unanticipated events place the contractual relationship outside the self enforcing range this probabilistic framework where transactors enter contractual relationships knowing that a hold up may take place but believing that the expected gains from trade outweigh the expected rent dissipating costs associated with the hold up risk is shown to have important implications for understanding the structure of contracts adopted by transactors in the marketplace i why do hold ups occur i begin with a simple example that illustrates the basic economic forces involved in a hold up assume that a builder constructs a house on a piece of land the builder does not own but rather only leases short term after the initial land lease expires the landowner could hold up the builder by raising the land rent to reflect the costs of moving the house to another lot this example illustrates all the hold up factors emphasized in klein crawford and alchian a the builder has made an investment that is highly specific to a particular piece of land and b the landowner has taken advantage of the incompleteness of the contract that governs the relationship in particular the fact that the lease does not cover future years to c expropriate the quasi rents on the builder s specific investment the obvious question is why anything like this would ever occur that is why would someone be so naive as to build a house on land for which they had only a short term lease our primary goal in klein crawford and alchian was not to explain the existence of hold ups but rather the institutions adopted by transactors to avoid hold ups for example we would expect that builders anticipating a potential hold up problem would decide to purchase the land or at least to sign a long term ground lease before starting construction however we do present some examples in the paper of hold ups that actually occurred the implicit reason we give for the occurrence of these hold ups is transactor ignorance apparently transactors are not always smart enough to choose the contractual arrangement that would eliminate the hold up problem oliver williamson provides a similar but much more explicit answer to the question of why hold ups occur when defining opportunism he states by opportunism i mean self interest seeking with guile this includes but is scarcely limited to more blatant forms such as lying stealing and cheating opportunism more often involves subtle forms of deceit more generally opportunism refers to the incomplete or distorted disclosure of information especially to calculated efforts to mislead distort obfuscate or otherwise confuse 1 for example the hold up may have occurred in our illustrative house construction example because the landowner deceived the builder with a low up front land rental price and vague promises about the future relying on the ability of one transactor to take advantage of the naivete or ignorance of another transactor is a highly unsatisfactory way to explain the incidence of hold ups simple examples of deception such as a builder constructing a house on land that is only rented short term rarely if ever occur

oligopsony power asset specificity and hold up evidence from the broiler industry in this article we look for empirical evidence of hold up in broiler industry production contracts by using the cross sectional national survey of broiler growers first we focus on the problem of under investment and hypothesize that the degree of agent s grower s under investment systematically depends on the principal s integrator s market power and the level of asset specificity second we provide an indirect test of hold up by looking at the grower contract payoffs as a function of the frequency of the housing facilities upgrade requests and the principal s market power the results show moderate empirical support for the presence of hold up

interfirm diversity organizational learning and longevity in global strategic alliances organizational theorists have correctly argued that the emergence and maintenance of robust cooperation between global strategic alliance partners is related to the diversity in the partners characteristics yet previous research has failed to systematically delineate the important dimensions of interfirm diversity and integrate the dimensions into a unified framework of analysis this paper develops a multilevel typology of interfirm diversity and focuses on organizational learning and adaptation as critical processes that dynamically moderate diversity s impact on alliance longevity and effectiveness

on the survival of contracts assessing the stability of technology licensing agreements in the brazilian seed industry abstract the present study focuses on contract duration as defined ex post meaning that the survival of contractual relationships is observed over time our empirical study employs hazard rate models with time varying covariates using data from technology licensing contracts between seed companies and a governmental rd 2 decrease as a function of past satisfactory outcomes 3 increase with the extent of disturbances affecting the technology s demand and other things being equal 4 increase rather than decrease over time

on the future of international joint venture research international joint ventures ijvs are an important type of international strategic alliance isa and have been studied by scholars for decades resulting in a plethora of empirical studies publications and reviews yet an inadequate accumulation of knowledge exists as a closer look reveals much more than providing a summary and critical assessment of past contributions this paper develops an expansive research agenda based upon a deep understanding of past research and comprehensive frameworks that distill this research we identify a number of research opportunities that would not only advance ijv research but also closely related literatures and disciplines such as isas theories of the multinational firm international business research and strategic management

complexity context and governance in biotechnology alliances this study explores the effect of coordination needs on alliance governance we examine coordination needs that arise as a consequence of the characteristics and the context of the alliance we posit that alliance characteristics and contextual factors influence alliance form and equity investment levels we evaluate the effects of the complexity of technology transfer and strategic complexity of the alliance we also study contextual factors represented by the distance between the intellectual property protection regimes of the home countries of the participants the focal firm s prior presence in the alliance country and its primary expertise in the industry we offer contrasting predictions based on appropriation and coordination perspectives our results demonstrate support for a dominant coordination perspective with alliance characteristics and some contextual factors influencing alliance form appropriation concerns play a weaker role and receive less support

contractual arrangements and enforcement in transition agriculture theory and evidence from china abstract this paper empirically investigates the relationship between contractual arrangements and their enforcement in chinese agriculture based on an analysis of a survey of 100 agribusiness firms engaged in contract farming in zhejiang province of china we find that private contract enforcement mechanisms play an important role in influencing smallholders decisions to breach or fulfill contracts contract arrangements such as floor pricing or requiring smallholders to make specific investments facilitate self enforcement and significantly improve the smallholder s contract fulfillment rate this is particularly important in chinese agriculture since the business environment is characterized by an absence of effective public enforcement institutions

the enforceability of the gm fisher body contract comment on goldberg goldberg unconvincingly claims that the general motors gm fisher body contract was in fact legally unenforceable but even if goldberg s contract law conclusion were correct it is economically irrelevant it is clear from the actions of fisher and gm and from the testimonial and other contemporaneous evidence that both transactors considered the contract legally binding and behaved accordingly therefore proper economic analysis of the fisher gm case should continue to assume contract enforceability and the economic determinants of organizational structure illustrated by the case remain fully valid

let s work it out or we ll see you in court litigation and private dispute resolution in vertical exchange relationships we examine how partners in vertical exchange relationships actually resolve disputes that are sufficiently serious to get lawyers involved reaching beyond the usual domain of organizational and management research we leverage findings from law and economics to offer a novel organizational perspective on litigation and private dispute resolution and we develop hypotheses about the likelihood of litigation in different exchange settings our empirical analysis generates three sets of new findings first counter to the received wisdom we see that the involvement of lawyers does not necessarily signal the bitter end of an exchange relationship because firms frequently manage to avoid litigation and resolve their disputes privately and they do so in a manner that accords with our theoretical predictions second we see that familiarity with exchange partners does not automatically lead to increased willingness to work things out rather our empirical results suggest that the impact of exchange duration on parties willingness to resolve disputes privately is contingent on the development of norms of cooperation in the event that such norms do not develop the probability of a litigated outcome actually increases over time finally we see that firms willingness to work things out privately is also influenced positively by the shadow of the future these findings are suggestive of a discriminating alignment between exchange characteristics and the choice of dispute resolution procedure and they thus inject important new evidence into ongoing discussions about the legal underpinnings of different governance forms

buyer supplier relations in industrial markets when do buyers risk making idiosyncratic investments it is well established that the existence of investments specific to a relationship influences the choice of governance structure including the use of contractual safeguards what is less well understood are the circumstances leading to the creation of those specific assets to begin with this paper explores the industrial buyer s motives to put itself at risk by making investments tangible and intangible which cannot be readily redeployed from one supplier to another using original data from a sample of 388 supply relationships involving all automakers in the u s and japan we examine features of the supply task the supplier and the supply environment which serve as motives to make supplier specific investments we also examine potential factors which facilitate the posting of specific assets as credible commitments to attenuate supplier opportunism we find that specific investments by buyers serve as a mechanism to 1 increase coordination when the manufacturing task is complex 2 buffer the buyer against technological uncertainty and 3 build close relationships when the requisite production skills are scarce the supply market is thin we find more specific investments in supply arrangements that are embedded in a broader business relationship we find fewer supplier specific investments in the japanese context finally we find that buyers focus their investments on lesser known low share component makers perhaps to capitalize on a unique focused supplier capability

using revenue sharing to implement flexible prices evidence from movie exhibition contracts movie exhibition contracts entail revenue sharing terms that go down with weeks since release we develop a simple model to show how the form of these contracts can be explained by the distributors desire to set flexible prices we then use detailed data on theater movie contracts in spain where we exploit the information available at the time of contracting for movies previously released in the u s and other movie and theater characteristics to show how the implications of our flexible pricing argument are supported in the data and differentiate our explanation from prior more standard risk sharing and moral hazard explanations

contractual flexibility rent seeking and renegotiation design an empirical analysis of information technology outsourcing contracts this paper examines renegotiation design in contracts for outsourced information technology it services whereas prior literature in information systems has highlighted the likelihood of ex post rent seeking engendered by renegotiation we build upon literature on incomplete contracts to posit that renegotiation can be pareto improving by incorporating contingencies revealed ex post research on contract renegotiation has been hampered by two sets of challenges the lack of appropriate data and empirical challenges in identification we circumvent this problem both by appropriate data collection and by employing an identification strategy to address alternate causal explanations we propose a measure pareto improving amendments to assess renegotiation outcomes that enhance the value from outsourcing by hazard equilibration and by incorporating learning using a unique sample of 141 it outsourcing contracts we examine the role of decision rights delineated ex ante in enabling pareto improving amendments and in resolving the trade off between adaptation and rent seeking we find that flexibility provisions termination for convenience rights and contractual rights whereby vendors are granted rights to reuse know how are associated with pareto improving amendments the results are robust to potential endogeneity of contractual provisions when parties have feasible foresight and to the possibility of adverse selection in the sample we also examine alternate explanations from the literature on contractual breach implications for practitioners and researchers are discussed this paper was accepted by sandra slaughter information systems

four formal izable theories of the firm in this essay i define and compare elemental versions of four theories of the firm these elemental theories are distilled from important contributions by hart holmstrom klein williamson and others although these contributions have been widely cited and much discussed i have found it difficult to understand the commonalities distinctions and potential combinations of these seemingly familiar contributions in this essay therefore i attempt to clarify these issues in three steps i begin with informal summaries of the theories then turn to simple but formal statements of each elemental theory and finally nest the four elemental theories in an integrative framework

interfirm cooperation in strategic relationships the role of formal contract in this paper we use a large database of more than 3 700 strategic relationships in force between french firms in 2003 to study the way they achieve cooperation we find that cooperation is enhanced by a partner s reputation and the perceived balance of the relationship our results also suggest that while formal contracts have a negative impact on ex post cooperation when relationships are simple contracts are an enhancing factor of cooperative behaviors as soon as the intrinsic hazards of the relationship require higher ex ante contractual safeguards to secure agreements as a result formal contracts can on the one hand have a pernicious effect on the willingness of firms to implement cooperative behaviors and on the other and under precise circumstances appear a prerequisite allowing the emergence of ex post interfirm cooperation

courts and contract enforcement in transition agriculture theory and evidence from poland abstract the paper investigates theoretically and empirically the role of courts for contract enforcement in transition agriculture in a survey of 306 polish farmers conducted in 1999 only 38 5 respondents reported to believe that they could use courts to enforce contracts with their most important customer furthermore those who believed the legal system could be used would accept significant financial losses before taking action we develop a theoretical model based on the costs and benefits of court enforcement which captures the boundary between contracts to be regarded as enforceable and not enforceable and simultaneously the threshold of taking legal action the empirical analysis strongly supports our model 1 the farmers responses can be explained by cost benefit calculations regarding the use of courts 2 the legal enforceability of contracts depends not only on the efficiency of the legal system but also on the attributes of the transaction the contracts and the relationship between buyer and seller and 3 the threshold of taking legal action is significantly influenced by indirect costs of court enforcement such as the disruption of a valuable business relationship and by the availability of alternative enforcement mechanisms

does ownership affect the variability of the production process evidence from international courier services a firm often must ensure that products or services it produces match customer expectations we define variability as any deviation in a production process yielding products or services whose attributes differ from the firm s stated target specifications firms pursuing products marked by low variability are more subject to maladaptation costs if production processes are not adjusted to avoid nonconformities furthermore such adjustments often require idiosyncratic investments e g dedicated information technology systems thereby creating contractual hazards and potential underinvestment we hypothesize that ownership of sequential activities in the value chain helps mitigate problems associated with maladaptation as well as suboptimalities in transaction specific investment thereby resulting in lower variability using data on delivery times from the japanese international courier and small package services industry we assess the variability reducing role of ownership in two complementary ways the first approach is parametric allowing us to assess the impact of ownership on the variance associated with delivery time here we focus on shipments that frequently fail to arrive precisely within the time period initially expected by customers the second approach is more consistent with the notion of reliability or the likelihood that shipments will not arrive later than expected we nonparametrically estimate the distribution of deviations between actual and expected delivery time and verify how distinct organizational choices change the distribution ownership of multiple segments yields a particularly pronounced effect on both variance and reliability ownership bestows variability reducing benefits of ownership especially when ownership is observed in multiple stages of the value chain

the antecedents and performance implications of cooperative exchange norms our study investigates the antecedents and performance implications of cooperative exchange norms we argue that in early relationships the level of expected cooperative norms in an exchange is the result of a calculative process facilitated by transaction attributes joint transaction specific investments and observability the greater the level of these two exchange attributes the greater the level of cooperative exchange norms all else being equal we further argue that the realized level of cooperative exchange norms can deviate from the expected level because the development of such norms is the result of social processes that management cannot directly and fully control this gap between realized and expected norms affects exchange performance performance suffers when the realized level of cooperative exchange norms falls below the expected level but overshooting expectations lays a critical groundwork for repeat transactions the analysis of a survey of 182 collaborative r d alliances provides initial support for our theory

enhancing the obsolescing bargain theory a longitudinal study of foreign ownership of u s and european multinationals this research attempts to enhance the obsolescing bargain theory for manufacturing companies by statistically testing the effects of nine explanatory variables on the static and dynamic manifestations of bargaining success with longitudinal firm level data in order to highlight those effects it develops a conceptual framework that provides a broader context in which the primary variables operate it demonstrates that the obsolescing bargain took effect in india over a fifteen year period following restrictive legislation unlike previous research this study measures the effect of benefits received by multinationals from the host government in exchange for equity dilution american companies are found to retain a smaller share of their foreign ownership over time than british and other european multinationals some explanatory variables that have previously been found to influence level of foreign ownership static bargaining success are found to be less important or have a different effect in explaining proportion of foreign ownership retained dynamic bargaining success

how private contract enforcement mechanisms can succeed where public institutions the enforcement of contracts is necessary for efficient exchange and investment in economic activities contracts can be enforced through a variety of mechanisms both public and private however in many developing and transitional countries these public institutions are either absent or ineffective in ensuring contract enforcement under such conditions private enforcement mechanisms may provide a suitable replacement for public enforcement institutions this may be done externally through a third party or internally through self enforcing agreements this paper analyzes the use of self enforcing arrangements or internal private enforcement mechanisms using a case study of an agri business in a transition economy juhocukor a s a slovakian sugar processor we show that the use of internal private contract enforcement mechanisms can have a significant positive effect on output and efficiency for both partners to the exchange transaction in an environment characterized by the absence or ineffectiveness of public enforcement institutions

formal contracts in the presence of relational enforcement mechanisms evidence from technology development projects formal contracting addresses the moral hazard problems inherent in interfirm deals via explicit terms designed to achieve incentive alignment alternatively when firms expect to interact repeatedly relational mechanisms may achieve similar results without the associated costs however as we now know from a growing body of theoretical and empirical work the resulting intuition that relational mechanisms will be substituted for formal ones whenever possible does not generally hold the extent to which firms substitute relational mechanisms for formal ones in the presence of repeated interaction is an empirical question that forms the basis of this paper we study a sample of 52 joint technology development contracts in the telecommunications and microelectronics industries and devise a coding scheme to allow empirical comparison of contract terms counter to the above intuition but consistent with recent research we find that a firm s contracts are more detailed and more likely to include penalties when it engages in frequent deals whether with the same or different partners our results suggest complementarity between formal and relational contracts and have implications for optimal contracting particularly in high technology sectors

creating and capturing value in repeated exchange relationships the second paradox of embeddedness prior empirical studies suggest repeated exchange develops increasing value in buyer supplier relationships a first order implication of this finding is that buyers will concentrate exchange among a relatively small number of suppliers to generate maximum value in relationships however buyers are equally concerned with value capture by distributing rather than concentrating exchange buyers may position themselves to capture more of the value created leaving buyers potentially conflicted concerning the choice we label this dynamic the second paradox of embeddedness distinguishing it from uzzi s uzzi b 1997 social structure and competition in inter firmnetworks the paradox of embeddedness admin sci quart 42 1 35 67 paradox driven by technological uncertainty by examining the procurement activities of a large diversified manufacturing company we then test for supplier and buyer behavior consistent with the conditions that give rise to the second paradox and behaviors that result from it

contractual implications of international trade in tacit knowledge this article searches for evidence on the additional difficulty the parties have in contracting for the transfer of know how relative to the transfer of patented technology a sample of contracts for the acquisition of technology spanish firms in 1991 is analysed to find a positive relationship between contract duration and the likelihood of transferring know how in unaffiliated transfers it is also found that technical assistance is bundled together with the transfer of know how suggesting that the parties try to mitigate opportunistic behaviour on the licensor s side

explicit versus implicit contracts evidence from ceo employment agreements we report evidence on the determinants of whether the relationship between a firm and its chief executive officer ceo is governed by an explicit written or an im plicit agreement we find that fewer than half of the ceos of s p 500 firms have comprehensive explicit employment agreements consistent with contracting theory explicit agreements are more likely to be observed and are likely to have a longer du ration in situations in which the sustamabihty of the relationship is less certain and where the expected loss to the ceo is greater if the firm fails to honor the agreement when a firm hires a chief executive officer ceo it enters into a complex relationship that has significant long term implications for its stockholders establishing the terms of this relationship requires determining the ceo s responsibilities compensation perquisites and term of employment the con ditions under which either party can sever the relationship and restrictions on the ceo s outside activities among other considerations despite the com plexity of these arrangements many public companies including some of the largest choose not to put such terms in writing in 2000 less than half of the firms in the s p 500 had a comprehensive written or explicit employment agreement ea with their ceos the other firms had either no written agree ment at all or agreements that covered only limited aspects of their relationship with the ceo such as change of control nondisclosure noncompete or nonso licitation agreements these latter firms and their ceos relied on implicit eas through which the ceo was employed at will we report evidence on the determinants of whether the relationship between a firm and its ceo is contractually defined in an explicit agreement this

managerial behaviors and job performance a successful manager in los angeles may not succeed in hong kong few studies have attempted to examine how american managers actually manage while on assignment in foreign countries or the effectiveness of these managerial behaviors this study compared the self reported managerial behaviors of american expatriate managers in hong kong to a sample of american managers in the u s and hong kong chinese managers in hong kong the results from the study indicated that american expatriate managers in hong kong exhibit very similar managerial behaviors to the sample of managers in the u s however while these managerial behaviors were positively related to job performance for the managers in the u s they were not related to job performance for the expatriates in hong kong nor were these managerial behaviors related to job performance for hong kong chinese managers in hong kong

a cross national study of managerial values this study investigated cross national differences in managerial values a total of 567 managers from twelve nations participated in the study managerial values were assessed by means of rokeach s value survey factor analysis of the eighteen instrumental values included in rokeach s value survey revealed four underlying value dimensions the value dimension that included the instrumental values broadminded capable and courageous was ranked as the most important value dimension by managers from all twelve nations national differences were found on three of the four value dimensions