Managerial Contracting: A Preliminary Study

Abstract Important types of contractual relationships—among them those between integrated product manufacturers and their suppliers—are neither fully transactional nor relational. The agreements that govern these relationships incorporate highly detailed written terms focus not only on what is promised but also the details how it to be achieved suppliers’ actions will monitored responded over life agreement. Together with implicit relational contracts support operation, provisions create an economic hybrid lies markets hierarchies, a set relatively standard institutional arrangements give buyers right (but obligation) exercise package quasi-integration rights enables obtain many most important benefits vertical integration while simultaneously reaping core outsourcing. contract used are termed here “managerial provisions” because they employ techniques intra-firm hierarchy managers use organize increase productivity within firms. This article focuses subset provisions, namely analogous eighteen management practices World Management Survey (WMS) reveals closely associated persistent performance differences across similarly situated enterprises. After documenting convergence procurement contracts, suggests governance regime well designed creation maintenance cooperative relationships, strengthen force network governance, scaffold emergence type inter-firm process-based trust better supplier performance. More generally, this concludes in modern economy, where value so contracts—from research development alliances business process outsourcing beyond—depends employees contracting entities working together much as if worked for single firm, lawyers would advised look broad array managerial successfully firms (not based WMS practices) develop new ways transactions