The Effect of Contractual Complexity on Technology Sourcing Agreements

Most research on strategic alliances ignores the underlying contracts that govern the terms of the relationship. This is problematic since it is how these contracts are structured that determines how firms will benefit from a relationship. We present a novel method to analyze contractual complexity in a multi-dimensional framework in an attempt to link together the contractual complexity and control rights literatures. We find that the stage of development, age and prevalence of the underlying technology most influence complexity. Contractual complexity also influences the allocation of control rights. We also explore the importance of prior relationships on the underlying contract.Contractual complexity; Control rights; Strategic alliances; Biopharmaceutical industry; Contractual design

Which governs - the relationship or the contract?

According to the transaction cost economics literature, a firm’s external contractual relationships must be ‘fit for purpose’. What is a ‘fit for purpose’ contractual relationship should not be a normative decision, but an objective one, to be made with regard to achieving transaction cost efficiency, while defending the core competencies of the firm. Data from a Hong Kong case study is used to examine whether or not the client’s choice of contractual relationship is ‘fit for purpose’ and also to evaluate the impact of such a choice. The findings suggest that maintaining a relationship of high quality as a strategic policy not only reduces recourse to the contract but, also improves the quality and predictability of project performance and, is an antidote to ill-aligned contractual elements. These findings lend support to the growing trend towards relationship or relational contracting in construction

Contractual savings institutions and banks'stability and efficiency

The authors analyze the relationship between the development of contractual savings institutions and banks'efficiency, credit, and liquidity risks. They discuss the potential mechanisms through which the development of contractual savings institutions may affect the banking sector. They show that the development of contractual savings institutions has a significant impact on bank spreads and loan maturity. After controlling for banks'characteristics, macroeconomic factors, and more standard indicators of financial development, they show that the development of contractual savings institutions is associated with increased efficiency of the banking system and greater resilience to credit and liquidity risks.Payment Systems&Infrastructure,Banks&Banking Reform,Economic Theory&Research,Financial Intermediation,Insurance&Risk Mitigation,Contractual Savings,Banks&Banking Reform,Financial Intermediation,Economic Theory&Research,Insurance&Risk Mitigation

A relational theory of relationship lending under contractual incompleteness

While the literature has focused on relationships as a technology for solving hidden information problems in credit markets, hidden action has been very little explored as an explanation for the existence of relational lending. In this paper, we propose a theory in which relationships are driven by the problem of contractual incompleteness in instances in which a borrower, by taking ex-ante actions, magnifies the hazards related to ex-post bargaining over returns. A relationship commits the borrower to take actions that minimize the ex-post conflict of interests resulting from contractual incompleteness. We show that a robust feature of an optimally designed lending relationship (i.e., the best Public Perfect Pure Strategy Equilibrium in a repeated lending game) is that a sufficiently patient entrepreneur, upon choosing his actions, ignores his privately observed contingencies. This commitment solves the credit rationing problem that arises in a one-shot (arm’s length) interaction, and reduces, when compared to arm’s length financing, the interest rate that a bank charges for a credit line. Although in a less acute fashion, we also show that the same features just described appear in an optimal lending relationship for the case in which the entrepreneur is impatient.

The paradoxes of the theory of imprévision in the new French law of contract: a judicial deterrent?

As part of the reform of the law of contracts,the theory of imprévision is now enshrined in Article 1195 CC of the French Civil Code. The novelty of this article lies essentially in the new judicial power of review. As this paper shows, Article 1195 CC raises three paradoxes:the first one in the nature of the article itself as a default rule that encourages a voluntary ex-ante contractual solution over a judicial solution through careful pre-emptive drafting;the second at the renegotiation phase as the affected party has the right to request renegotiation whereas the other contracting party the right to refuse to renegotiate; and the third in the new judicial powers that play as a deterrent and favour an ex-post contractual solution through renegotiation. Overall, this article demonstrates a clear bias for a private contractual and negotiated solution (over a judicial one). Small and medium sized businesses are likely to avail themselves of the new framework to redefine their contractual relationship. By contrast, larger commercial enterprises are further incentivised to enhance their self-reliance by boosting forward-looking contractual and expert determination provisions dealing with changed circumstances. The fear of a snowball effect with the provision generating a a more interventionist judicial attitude appears therefore exaggerated

The concept of good faith in international investment disputes - the arbitrator's dilemma

Professor A.F.M. Maniruzzaman examines the origins and development of the concept of good faith and in particular its application, scope and function in a contractual relationship

Contracts and the Division of Labor

We develop a tractable framework for the analysis of the relationship between contractual incompleteness, technological complementarities, and technology adoption. In our model a firm chooses its technology and investment levels in contractible activities by suppliers of intermediate inputs. Suppliers then choose investments in noncontractible activities, anticipating payoffs from an ex post bargaining game. We show that greater contractual incompleteness leads to the adoption of less advanced technologies and that the impact of contractual incompleteness is more pronounced when there is greater complementary among the intermediate inputs. We study a number of applications of the main framework and show that the mechanism proposed in the paper can generate sizable productivity differences across countries with different contracting institutions and that differences in contracting institutions lead to endogenous comparative advantage differences.

Contractual savings or stock market development - Which leads?

The authors study the relationship between the development of contractual savings (assets of pension funds, and life insurance companies) and non-life insurance, and, the development of stock markets (market capitalization and value traded). Their contribution lies in providing time-series evidence on a hypothesis that is very popular - but had not been substantiated - among supporters of fully funded pension systems in which funds invest large shares of their portfolios in tradable securities (equities, bonds). The literature is not clear on its assumption regarding causality between contractual savings, and capital market development. A one-way or two-way relationship is assumed, usually inter-changeably; the authors address the questions of which leads empirically. They present the evidence, including descriptive statistics, and the results of Granger causality tests, for OECD countries, and such countries as Chile, Malaysia, Singapore, South Africa, and Thailand. They do not present a theoretical framework, but do explain how the growth of the contractual savings sector, is thought to promote financial development. The authors find evidence in the data that causality between institutions, and markets either does not exist, or, if it exists, runs predominantly from institutions to markets. To a lesser extent, there is simultaneous causality between institutions, and markets. Furthermore, there is limited evidence that causality runsonly from markets to institutions (the only exception seems to be for non-life insurance in developing countries). Results seem to support the idea that the development of institutional investors, is likely to promote the growth of market capitalization, more than that of value traded. In developing countries, there seems to be no causality from pension funds to growth in value traded, while there is causality from life, and non-life insurance.International Terrorism&Counterterrorism,Economic Theory&Research,Banks&Banking Reform,Payment Systems&Infrastructure,Financial Intermediation,Financial Intermediation,Contractual Savings,Insurance Law,Economic Theory&Research,Banks&Banking Reform

Medico-Legal Litigation : the clinical contractual nature of the Obstetric Anaesthetist-Patient relationship

Once the hand-maiden of obstetrics, obstetric anaesthesia, now a fully fledged sub-speciality today provides indispensable multi-faceted services mainly but not solely to the peripartum obstetric patient. Be it in routine as well as acute obstetric work, the speciality is an integral part of the team made up of obstetrician, midwife and neonatologist. Its input ensures modern optimal care to the parturient patient and her baby.1 The anaesthetist’s unique resusucitatoy skills and critical care experience makes him/her particularly valuable, especially in high-risk patients1 as evidenced by the struggle of units lacking such a service in overcoming numerous adminsitrative, financial and logistical problems to reach this paragon of standard of care.2 By the very nature of the acutely challenging situations it deals with, this speciality is especially vulnerable to medico-legal litigation.peer-reviewe

University-State Child Welfare Training Partnerships: The Challenge of Matching Dollar Contributions

Universities are uniquely positioned to provide the very best training opportunities to public child welfare workers. However, university–child welfare agency training partnerships require a significant commitment of time and resources by university personnel at a time of extensive state cuts to public higher education. This national survey of university partnership administrators found significant differences among university respondents involving length of the contractual relationship, matching dollar requirements, and overall satisfaction with the training partnership