Hostname: page-component-cd9895bd7-hc48f Total loading time: 0 Render date: 2024-12-24T12:24:48.343Z Has data issue: false hasContentIssue false
  • English
  • Français

Deals that start when you sign them

Published online by Cambridge University Press:  31 August 2021

Robert Gibbons Open the ORCID record for Robert Gibbons [Opens in a new window]
Robert Gibbons*
Affiliation:
MIT Sloan School of Management, Massachusetts Institute of Technology, Cambridge, MA, USA
*
Corresponding author. Email: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

This essay explores six sentences from Oliver Williamson – five providing context and the sixth the central topic. Decades ago, Williamson asserted that: (a) ‘substantially the same factors’ (1973: 316) create governance issues not only within organizations but also in interactions between organizations; and (b) relational contracting might be useful in addressing these issues in both domains (1979, Figure II). More recently – in an informal conversation in 2002 – he suggested a perspective on relational contracting that appears valuable in both of these domains: relational contracts as ‘deals that start when you sign them’. The bulk of this essay explores past, present, and potential research on this perspective.

Keywords

Clarity problemrelational contractWilliamson
Type
Research Article
Information
Journal of Institutional Economics , Volume 18 , Issue 2 , April 2022 , pp. 269 - 282
Copyright
Copyright © The Author(s), 2021. Published by Cambridge University Press on behalf of Millennium Economics Ltd.

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Adelstein, R. (2010), ‘Firms as Social Actors’, Journal of Institutional Economics, 6: 329–349.CrossRefGoogle Scholar
Argyres, N. (2021), ‘Virtual Special Issue: The Organizational Economics of Organizational Capability Development’, Organization Science, 32: 522–525.CrossRefGoogle Scholar
Argyres, N., Felin, T., Foss, N. and Zenger, T. (2012), ‘Organizational Economics of Capability and Heterogeneity’, Organization Science, 23: 1213–1226.CrossRefGoogle Scholar
Arrow, K. (1953) ‘Le role des valeurs boursieres pour la repartition la meilleure des risques’, Econometrie, Centre National de la Recherche Scientifique, Paris, pp. 41–48.Google Scholar
Baker, G., Gibbons, R. and Murphy, K. J. (1994), ‘Subjective Performance Measures in Optimal Incentive Contracts’, Quarterly Journal of Economics, 109: 1125–1156.CrossRefGoogle Scholar
Baker, G., Gibbons, R. and Murphy, K. J. (2002), ‘Relational Contracts and the Theory of the Firm’, Quarterly Journal of Economics, 117: 39–83.CrossRefGoogle Scholar
Baker, G., Gibbons, R. and Murphy, K. J. (2011) ‘Relational Adaptation’, Unpublished, http://web.mit.edu/rgibbons/www/BGM%20Relnl%20Adapt%20Nov%2013.pdf.Google Scholar
Barney, J. (1986), ‘Organizational Culture: Can It Be a Source of Sustained Competitive Advantage?’, Academy of Management Review, 11: 656–665.CrossRefGoogle Scholar
Baudry, B. and Chassagnon, V. (2010), ‘The Close Relation Between Organization Theory and Oliver Williamson's Transaction Cost Economics: A Theory of the Firm Perspective’, Journal of Institutional Economics, 6: 477–503.CrossRefGoogle Scholar
Bernstein, L. (2015), ‘Beyond Relational Contracts: Social Capital and Network Governance in Procurement Contracts’, Journal of Legal Analysis, 7: 561–621.CrossRefGoogle Scholar
Blau, P. and Scott, R. (1962), Formal Organizations, San Francisco, CA: Chandler Publishing.Google Scholar
Bloom, N. and Van Reenen, J. (2007), ‘Measuring and Explaining Management Practices across Firms and Countries’, Quarterly Journal of Economics, 122: 1351–1408.CrossRefGoogle Scholar
Bloom, N., Brynjolfsson, E., Foster, L., Jarmin, R., Patnaik, M., Saporta-Eksten, I. and Van Reenen, J. (2019), ‘What Drives Differences in Management Practices?’, American Economic Review, 109: 1658–1683.CrossRefGoogle Scholar
Burt, R. (2005), Brokerage and Closure: An Introduction to Social Capital, Oxford: Oxford University Press.Google Scholar
Chassagnon, V. (2014), ‘Consummate Cooperation in the Network-Firm: Theoretical Insights and Empirical Findings’, European Management Journal, 32: 260–274.CrossRefGoogle Scholar
Chassagnon, V. and Haned, N. (2019), ‘The Private and Public Normative Orderings of the Modern Firm: Industrial Pluralism in a History of Organizational Thought Perspective’, Cahiers D’Économie Politique, 76: 89–116.CrossRefGoogle Scholar
Chiu, L.-H. (1972), ‘A Cross-Cultural Comparison of Cognitive Style in Chinese and American Children’, International Journal of Psychology, 7: 235–242.CrossRefGoogle Scholar
Clay, K. (1997) ‘Trade Without Law: Private-Order Institutions in Mexican California’, Journal of Law, Economics, and Organization, 13: 202–231.CrossRefGoogle Scholar
Debreu, G. (1959), Theory of Value, New York, NY: John Wiley.Google Scholar
Denzau, A. and North, D. (1994), ‘Shared Mental Models: Ideologies and Institutions’, Kyklos, 47: 3–31.CrossRefGoogle Scholar
Dhillon, A. and Rigolini, J. (2011), ‘Development and the Interaction of Enforcement Institutions’, Journal of Public Economics, 95: 79–87.CrossRefGoogle Scholar
DiMaggio, P. (1994), ‘Culture and Economy’, in Smelser, N. and Swedberg, R. (eds), The Handbook of Economic Sociology, Princeton: Princeton University Press, pp. 27–57.Google Scholar
DiMaggio, P. and Powell, W. (1983), ‘The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organizational Fields’, American Sociological Review, 48: 147–160.CrossRefGoogle Scholar
Di Tella, R. and MacCulloch, R. (2002), ‘Informal Family Insurance and the Design of the Welfare State’, Economic Journal, 112: 481–503.CrossRefGoogle Scholar
Dixit, A. (2009), ‘Governance Institutions and Economic Activity’, American Economic Review, 99: 5–24.CrossRefGoogle Scholar
Dore, R. (1983), ‘Goodwill and the Spirit of Market Capitalism’, The British Journal of Sociology, 34: 459–482.CrossRefGoogle Scholar
Doz, Y. (1996), ‘The Evolution of Cooperation in Strategic Alliances: Initial Conditions or Learning Processes?’, Strategic Management Journal, 17: 55–83.CrossRefGoogle Scholar
Eccles, R. (1981), ‘The Quasifirm in the Construction Industry’, Journal of Economic Behavior and Organization, 2: 335–357.CrossRefGoogle Scholar
Eggers, J. P. and Kaplan, S. (2013), ‘Cognition and Capabilities: A Multi-Level Perspective’, The Academy of Management Annals, 7: 295–340.CrossRefGoogle Scholar
Fast, N. and Berg, N. (1975) ‘The Lincoln Electric Company,’ Harvard Business School Case #376-028.Google Scholar
Foss, N. (2003), ‘Selective Intervention and Internal Hybrids: Interpreting and Learning from the Rise and Decline of the Oticon Spaghetti Organization’, Organization Science, 14: 331–349.CrossRefGoogle Scholar
Frydlinger, D., Hart, O. and Vitasek, K. (2019) ‘A New Approach to Contracts: How to build better long-term strategic partnerships’, Harvard Business Review Sept.-Oct.Google Scholar
Gibbons, R. (2005), ‘Four Formal(izable) Theories of the Firm’, Journal of Economic Behavior and Organization, 58: 202–247.CrossRefGoogle Scholar
Gibbons, R. (2010), ‘Transaction-Cost Economics: Past, Present, and Future?’, Scandinavian Journal of Economics, 112: 263–288.CrossRefGoogle Scholar
Gibbons, R. (2020), ‘Visible Hands: Governance of Value Creation – Within Firms and Beyond’, American Economic Review Papers & Proceedings, 110: 172–176.CrossRefGoogle Scholar
Gibbons, R. and Henderson, R. (2012), ‘Relational Contracts and Organizational Capabilities’, Organization Science, 23: 1350–1364.CrossRefGoogle Scholar
Gibbons, R. and Henderson, R. (2013) ‘What Do Managers Do? Exploring Persistent Performance Differences among Seemingly Similar Enterprises’, Chapter 17 in Gibbons, R. and Roberts, J. (eds), Handbook of Organizational Economics, Princeton, NJ: Princeton University Press, pp. 680–731.CrossRefGoogle Scholar
Gibbons, R., LiCalzi, M. and Warglien, M. (2021a), ‘What Situation Is This? Shared Frames and Collective Performance’, Strategy Science, 6: 124–140.CrossRefGoogle Scholar
Gibbons, R., Siegel, J. and Weber, R. A. (2021b), ‘Strategy Meets Culture (for Breakfast): Understanding the Relationship and Highlighting its Potential’, Strategy Science, 6: 111–118.CrossRefGoogle Scholar
Gibbons, R., Grieder, M., Herz, H. and Zehnder, C. (2022) “Building an Equilibrium: Rules versus Principles in Relational Contracts.” Forthcoming in Organization Science.Google Scholar
Gil, R. and Zanarone, G. (2017), ‘Formal and Informal Contracting: Theory and Evidence’, Annual Review of Law and Social Science, 13: 141–159.CrossRefGoogle Scholar
Gil, R. and Zanarone, G. (2018), ‘On the Determinants and Consequences of Informal Contracting’, Journal of Economics & Management Strategy, 27: 726–741.CrossRefGoogle Scholar
Gilson, R., Sabel, C. and Scott, R. (2009), ‘Contracting for Innovation: Vertical Disintegration and Interfirm Collaboration’, Columbia Law Review, 109: 431–502.Google Scholar
Gilson, R., Sabel, C. and Scott, R. (2010), ‘Braiding: The Interaction of Formal and Informal Contracting in Theory, Practice, and Doctrine’, Columbia Law Review, 110: 1377–1447.Google Scholar
Grandori, A. and Furlotti, M. (2019), ‘Contracting for the Unknown and the Logic of Innovation’, European Management Review, 16: 413–426.CrossRefGoogle Scholar
Granovetter, M. (1985), ‘Economic Action and Social Structure: The Problem of Embeddedness’, American Journal of Sociology, 91: 481–510.CrossRefGoogle Scholar
Greif, A. (1993), ‘Contract Enforceability and Economic Institutions in Early Trade: The Maghribi Traders’ Coalition’, American Economic Review, 83: 525–548.Google Scholar
Greif, A., Milgrom, P. and Weingast, B. (1994), ‘Coordination, Commitment, and Enforcement: The Case of the Merchant Guild’, Journal of Political Economy 102: 745–776.CrossRefGoogle Scholar
Grossman, S. and Hart, O. (1986), ‘The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Ownership’, Journal of Political Economy, 94: 691–719.CrossRefGoogle Scholar
Hadfield, G. and Bozovic, I. (2016), ‘Scaffolding: Using Formal Contracts to Support Informal Relations in Support of Innovation’, Wisconsin Law Review, 5: 981–1032.Google Scholar
Hart, O. and Moore, J. (1990), ‘Property Rights and the Nature of the Firm’, Journal of Political Economy, 98: 1119–1158.CrossRefGoogle Scholar
Keller, A., Lumineau, F., Mellewigt, T. and Ariño, A.. 2021. ‘Alliance Governance Mechanisms in the Face of Disruption’, Forthcoming, Organization Science.CrossRefGoogle Scholar
Klein, B. (2000), ‘The Role of Incomplete Contracts in Self-Enforcing Relationships’, Revue D'Economie Industrielle, 92: 67–80.CrossRefGoogle Scholar
Klein, B., Crawford, R. and Alchian, A. (1978), ‘Vertical Integration, Appropriable Rents and the Competitive Contracting Process’, Journal of Law and Economics, 21: 297–326.CrossRefGoogle Scholar
Kogut, B. and Zander, U. (1992), ‘Knowledge of the Firm, Combinative Capabilities, and the Replication of Technology’, Organization Science, 3: 383–397.CrossRefGoogle Scholar
Kranton, R. (1996), ‘Reciprocal Exchange: A Self-Sustaining System’, American Economic Review, 86: 830–851.Google Scholar
Kreps, D. (1990) ‘Corporate Culture and Economic Theory’, Chapter 4 in Alt, J. and Shepsle, K. (eds), Perspectives on Positive Political Economy, Cambridge, UK: Cambridge University Press, pp. 90–143.CrossRefGoogle Scholar
Kreps, D. (1996), ‘Markets and Hierarchies and (Mathematical) Economic Theory’, Industrial and Corporate Change, 5: 561–595.CrossRefGoogle Scholar
Macaulay, S. (1963), ‘Non-contractual Relations in Business: A Preliminary Study’, American Sociological Review, 28: 55–67.CrossRefGoogle Scholar
Macneil, I. (1978), ‘Contracts: Adjustments of Long-Term Economic Relations under Classical, Neoclassical, and Relational Contract Law’, Northwestern University Law Review, 72: 854–905.Google Scholar
Malcomson, J. (2013) ‘Relational Incentive Contracts’, Chapter 25 in Gibbons, R. and Roberts, J. (eds), Handbook of Organizational Economics, Princeton, NJ: Princeton University Press, pp. 1014–1065.CrossRefGoogle Scholar
Mayer, K. and Argyres, N. (2004), ‘Learning to Contract: Evidence from the Personal Computer Industry’, Organization Science, 15: 394–410.CrossRefGoogle Scholar
Ménard, C. (2004), ‘The Economics of Hybrid Organizations’, Journal of Institutional and Theoretical Economics, 160: 345–376.CrossRefGoogle Scholar
Meyer, J. and Rowan, B. (1977), ‘Institutionalized Organizations: Formal Structure as Myth and Ceremony’, American Journal of Sociology, 83: 340–363.CrossRefGoogle Scholar
Milgrom, P., North, D. and Weingast, B. (1990), ‘The Role of Institutions in the Revival of Trade: The Law Merchant, Private Judges, and the Champagne Fairs’, Economics and Politics, 2: 1–23.CrossRefGoogle Scholar
Moore, J. and Repullo, R. (1988), ‘Subgame Perfect Implementation’, Econometrica, 56: 1191–1220.CrossRefGoogle Scholar
Nisbett, R. (2003), The Geography of Thought: How Asians and Westerners Think Differently … and Why, New York, NY: The Free Press.Google Scholar
Ostrom, E. (1990), Governing the Commons: The Evolution of Institutions for Collective Action, Cambridge, UK: Cambridge University Press.CrossRefGoogle Scholar
Ostrom, E. (2010), ‘Beyond Markets and States: Polycentric Governance of Complex Economic Systems’, American Economic Review, 100: 1–33.CrossRefGoogle Scholar
Patterson, O. (2014), ‘Making Sense of Culture’, Annual Review of Sociology, 40: 1–30.CrossRefGoogle Scholar
Penrose, E. (1959), The Theory of the Growth of the Firm, New York: John Wiley.Google Scholar
Pettigrew, A. (1979), ‘On Studying Organizational Cultures’, Administrative Science Quarterly, 24: 570–581.CrossRefGoogle Scholar
Polanyi, M. (1966), The Tacit Dimension, London: Routledge & Kegan Paul.Google Scholar
Powell, W. (1990), ‘Neither Market Nor Hierarchy: Network Forms of Organization’, Research in Organizational Behavior, 12: 295–336.Google Scholar
Prendergast, C. and Stole, L. (1999), ‘Restricting the Means of Exchange Within Organizations’, European Economic Review, 43: 1007–1019.CrossRefGoogle Scholar
Richardson, G. (1972), ‘The Organisation of Industry’, Economic Journal, 82: 883–896.CrossRefGoogle Scholar
Rousseau, D., Sitkin, S., Burt, R. and Camerer, C. (1998), ‘Not So Different After All: A Cross-Discipline View of Trust’, Academy of Management Review, 23: 393–404.CrossRefGoogle Scholar
Schein, E. (1985), Organizational Culture and Leadership (1st edn), San Francisco, CA: Jossey-Bass, (4th ed., 2010).Google Scholar
Schmidt, K. and Schnitzer, M. (1995), ‘The Interaction of Explicit and Implicit Contracts’, Economics Letters, 48: 193–199.CrossRefGoogle Scholar
Simon, H. (1951), ‘A Formal Theory of the Employment Relationship’, Econometrica, 19: 293–305.CrossRefGoogle Scholar
Stinchcombe, A. (1985), ‘Contracts as Hierarchical Documents’, Chapter 2 in Stinchcombe, A. and Heimer, C. (eds.), Organization Theory and Project Management, Oslo: Norwegian University Press. Reprinted as Chapter 6 in A. Stinchcombe (1990), Information and Organizations. Berkeley: University of California Press.Google Scholar
Syverson, C. (2011), ‘What Determines Productivity?’, Journal of Economic Literature, 49: 326–365.CrossRefGoogle Scholar
Thornton, P., Ocasio, W. and Lounsbury, M. (2012), The Institutional Logics Perspective: A New Approach to Culture, Structure, and Process, Oxford, UK: Oxford University Press.CrossRefGoogle Scholar
Turco, C. (2016), The Conversational Firm: Rethinking Bureaucracy in the Age of Social Media, New York: Columbia University Press.CrossRefGoogle Scholar
Walsh, J. (1995), ‘Managerial and Organizational Cognition: Notes from a Trip Down Memory Lane’, Organization Science, 6: 280–321.CrossRefGoogle Scholar
Williamson, O. (1971), ‘The Vertical Integration of Production: Market Failure Considerations’, American Economic Review, 63: 316–325.Google Scholar
Williamson, O. (1973), ‘Markets and Hierarchies: Some Elementary Considerations’, American Economic Review, 63: 316–325.Google Scholar
Williamson, O. (1975), Markets and Hierarchies: Analysis and Antitrust Implications, New York, NY: Free Press.Google Scholar
Williamson, O. (1979), ‘Transaction-Cost Economics: The Governance of Contractual Relations’, Journal of Law and Economics, 22: 233–261.CrossRefGoogle Scholar
Williamson, O. (1985), The Economic Institutions of Capitalism: Firms, Markets, and Relational Contracts, New York, NY: Free Press.Google Scholar
Williamson, O. (1991), ‘Comparative Economic Organization: The Analysis of Discrete Structural Alternatives’, Administrative Science Quarterly, 36: 269–296.CrossRefGoogle Scholar
Williamson, O. (1996), The Mechanisms of Governance, Oxford, UK: Oxford University Press.Google Scholar
Williamson, O. (1999), ‘Strategy Research: Governance and Competence Perspectives’, Strategic Management Journal, 20: 1087–1108.3.0.CO;2-Z>CrossRefGoogle Scholar
Williamson, O. (2000), ‘The New Institutional Economics: Taking Stock, Looking Ahead’, Journal of Economic Literature, 38: 595–613.CrossRefGoogle Scholar
Williamson, O. (2002), ‘The Lens of Contract: Private Ordering’, American Economic Review, 92: 438–443.CrossRefGoogle Scholar
Zerubavel, E. (1991), The Fine Line, New York, NY: The Free Press.Google Scholar