This thesis studies the efficient organisation of economic institutions. In the first chapter we analyse how foreign direct investment projects can generate spillovers through backward linkages. An investment project can generate such spillovers if local competitors in the project's own industry can benefit from the upstream efficiency improvements that were induced by the entry of the foreign firm. The existence of the spillover effect depends crucially on the supplier arrangement that is chosen by the foreign firm. The foreign firm could avoid the spillover effect by producing the input itself or by contracting with only a small number of local suppliers. We use an incomplete contract framework to study the conditions under which the foreign firm optimally chooses a supplier arrangement that generates spillovers to the local industry. In the second chapter we study an incomplete contract model in which a buyer and a seller first agree on an efficient ownership structure and then bargain over the price of an input. We allow for asymmetric information at the ex post bargaining stage. The ownership structure that the agents agree on ex ante determines the payoff that each of them can realise before reaching agreement ex post. We show that an ownership structure that lowers the parties' joint pre-agreement payoffs accelerates ex post decision making but also makes delay in decision making more costly. We derive the ownership distribution that minimises the ex post bargaining inefficiencies. In the third chapter we compare the efficiency of private and public provision of contract enforcement services. We show that self-interested agents with coercive power may have an incentive to use this power to enforce contracts between third parties. However, such agents also engage in extortion. We analyse how social welfare depends on the number of self-interested agents with coercive power and whether such agents face democratic elections
