Abstract: The aim of this study is uncover the “microfoundations” of the contract design process. We build upon Argyres and Mayer’s (2007) “dual alignment” principle and examine the role of lawyers in the development of R&D alliance contracts, particularly as related to the inclusion of unilateral termination rights. We argue that the inclusion of such rights will be conditioned by the training and professional socialization that lawyers receive. Thus, this study seeks to augment the traditional theories utilized in the study of contract design by taking normative social pressures into consideration. We also seek to investigate how the interplay between a lawyers’ training and their firm’s historical contracting practices impact the development of new contracts. The empirical setting for this study is the medical device industry.

Abstract: We examine how formal collaboration allows organizations to resolve performance tradeoffs that cannot be resolved informally. The theory is tested on data describing U.S. fire departments, which seek primarily to prevent casualties and secondarily to save property. The results demonstrate that informal collaboration between departments prevents casualties and saves some property above what departments can achieve alone. Among collaborating departments, formal contracts are needed to improve performance above what can be achieved informally on the goal of saving property. Formality is required because the activities required to save property carry the risk of increased casualties. We conclude that prior studies of collaboration that do not account for ex ante informality or performance tradeoffs may understate the impact of collaboration on organization performance.

Abstract: Despite substantial scholarly interest in the role of contracts in alliances, few studies have analyzed the mechanisms and conditions relevant to their influence on alliance performance. We suggest that the effects of contracts depend on the types of provisions included and differentiate between the consequences of control and coordination provisions. Specifically, control provisions will increase the level of conflict between alliance partners whereas coordination provisions will decrease such conflict. Conflict, in turn, reduces alliance performance, suggesting a mediated relationship between alliance contracts and performance. We also contribute to a better understanding of contextual influences on the consequences of contracts and investigate the interactions of each contractual function with both internal and external uncertainties. Key informant survey data on 171 alliances largely support our conceptual model.

Abstract: Previous studies have relied predominantly on agency theory to understand relationships among stakeholders (actors) involved in a leveraged buyout transaction and explain inherent characteristics of LBO debt financing. However, traditional agency theory overlooks structural characteristics like dependencies and power-differentials between principals and agents. Using a multiple-agency framework on a sample of 6,609 LBO loan tranches that were issued during the period 1986-2012, we examine how power dynamics impact contractual outcomes among LBO participants. Our analysis is aimed at highlighting the asymmetric nature of power among agency partners. Agency conflicts are expected to be lower when lenders (principals) have a dependence advantage over PE-sponsors (agents) and higher when the latter possess more power in the relationship.