Lumineau, Fabrice and Frechet, Marc and Puthod, Dominique (2011): An organizational learning perspective on contract design. Published in: Strategic Organization , Vol. 1, No. 9 (2011)
Download (201Kb) | Preview
The contracting process is a crucial step in alliance development and its success. However, the existing literature reveals surprisingly little investigation into how organizational learning relates to the process of contract making. We therefore conducted an in-depth longitudinal study of the alliance contracting process in the animated film industry. First, our findings suggest that during the contracting process, firms can learn about the way to deal with the contracting process, about themselves and their partner, and about the transaction features. Second, the case analysis indicates a combination of experiential, vicarious, and inferential learning mechanisms. Combining these insights into the objects and the mechanisms of learning during the contracting process, we discuss how contracting and learning processes are related and analyze the role of the contracting process in supporting organizational learning. The findings show that the drafting of contractual clauses fosters learning and, in turn, this learning triggers new contractual negotiations. Hence we suggest that the alignment between transaction features and the choice of contractual governance results from learning during the contracting process. We then propose avenues for future research.
|Item Type:||MPRA Paper|
|Original Title:||An organizational learning perspective on contract design|
|Keywords:||Contracting process; Strategic alliances; Organizational learning; Longitudinal case study|
|Subjects:||D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D86 - Economics of Contract: Theory
L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L14 - Transactional Relationships; Contracts and Reputation; Networks
M - Business Administration and Business Economics; Marketing; Accounting > M1 - Business Administration
F - International Economics > F5 - International Relations and International Political Economy > F51 - International Conflicts; Negotiations; Sanctions
D - Microeconomics > D8 - Information, Knowledge, and Uncertainty
D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D83 - Search; Learning; Information and Knowledge; Communication; Belief
|Depositing User:||Fabrice Lumineau|
|Date Deposited:||25. Apr 2012 12:29|
|Last Modified:||13. Feb 2013 13:50|
Alchian, A. A. (1977) ‘Some Economics of Property Rights’, in A. A. Alchian (ed) Economic Forces at Work, pp. 127–49. Indianapolis, IN: Liberty Press.
Argote, L. (1999) Organizational Learning: Creating, Retaining, and Transferring Knowledge. Boston, MA: Kluwer Academic.
Argote, L. and Miron-Spektor, E. (2011) ‘Organizational Learning: From Experience to Knowledge’, Organization Science. Forthcoming.
Argyres, N. S., Bercovitz, J. and Mayer, K. J. (2007) ‘Complementarity and Evolution of Contractual Provisions: An empirical Study of IT Service Contracts’, Organization Science 18(1): 3–19.
Argyres, N. S. and Mayer, K. J. (2007) ‘Contract Design as Firm Capability: An Integration of Learning and Transaction Cost Perspectives’, Academy of Management Review 32(4): 1060–77.
Argyris, C. and Schön, D. (1978) Organizational Learning: A Theory of Action Perspective. Reading, MA: Addison-Wesley.
Ariño, A. and de la Torre, J. (1998) ‘Learning from Failure: Towards an Evolutionary Model of Collaborative Ventures’, Organization Science 9: 306–25.
Ariño, A. and Ring, P. S. (2010) ‘The Role of Fairness in Alliance Formation’, Strategic Management Journal 31(10): 1054–87.
Baum, J. A. C. and Dahlin, K. B. (2007) ‘Aspiration Performance and Railroads’ Patterns of Learning From Train Wrecks and Crashes’, Organization Science 18(3): 368–85.
Baum, J. A. C., Li, X. S. and Usher, J. M. (2000) ‘Making the Next Move: How Experiential and Vicarious Learning Shape the Locations of Chains’ Acquisitions’, Administrative Science Quarterly 45(4): 766–801.
Bell, J., den Ouden, B. and Ziggers, G. M. (2006) ‘Dynamics of Cooperation: At the Brink of Irrelevance’, Journal of Management Studies 43(7): 1607–19.
Bidwell, M. (2010) ‘Problems Deciding: How the Structure of Make-or-Buy Decisions Lead to Transaction Misalignment’, Organization Science 21(2): 362–79.
Bingham, C. B., Eisenhardt, K. M. and Davis, J. P. (2007) ‘Opening the Black Box of Organizational Expertise: Understanding What Firms Learn From their Process Experience and How that Learning Unfolds over Time’, Working Paper.
Broadbent, D. E. (1958) Perception and Communication. London, UK: Pergamon Press.
Cardinal, L. B., Sitkin, S. B. and Long, C. P. (2004) ‘Balancing and Rebalancing in the Creation and Evolution of Organizational Control’, Organization Science 15(4): 411–31.
Carlile, P. R. (2004) ‘Transferring, Translating, and Transforming: An Integrative Framework for Managing Knowledge Across Boundaries’, Organization Science 15(5): 555–68.
Chen, Y. and Bharadwaj, A. (2009) ‘An Empirical Analysis of Contract Structures in IT Outsourcing’, Information Systems Research 20(4): 484–506.
Coase, R. H. (1960) ‘The Problem of Social Cost’, Journal of Law and Economics 3: 1–44.
Cohen, W. M. and Levinthal, D. A. (1990). ‘Absorptive Capacity: A New Perspective on Learning and Innovation’, Administrative Science Quarterly 35: 128–52.
Contractor, F. and Ra, W. (2000). ‘Negotiating Alliance Contracts: Strategy and Behavioral Effects of Alternative Compensation Arrangements’, International Business Review 9: 271–99.
Crocker, K. J. and Masten, S. E. (1988) ‘Mitigating Contractual Hazards: Unilateral Options and Contract Length’ RAND Journal of Economics 19(3): 327–43.
Das, T. K. and Kumar, R. (2007) ‘Learning Dynamics in the Alliance Development Process’, Management Decision 45: 684–707.
Dekker, H. C. (2004) ‘Control of Inter-Organizational Relationships: Evidence on Appropriation Concerns and Coordination Requirements’, Accounting, Organization and Society 29(1): 27–49.
Dekker, H. C. and Van den Abbeele, A. (2010) ‘Organizational Learning and Interfirm Control: The Effects of Partner Search and Prior Exchange Experiences’, Organization Science 21: 1233–50.
Doz, Y. L. (1996) ‘The Evolution of Cooperation in Strategic Alliances: Initial Conditions or Learning Processes?’ Strategic Management Journal 17: 55–83.
Edmondson, A. C. and McManus, S. E. (2007) ‘Methodological Fit in Management Field Research’, Academy of Management Review 32(4): 1155–79.
Eisenhardt, K. M. (1989) ‘Building Theories From Case Study Research’, Academy of Management Review 14: 532–50.
Eisenhardt, K. M. and Graebner, M. E. (2007) ‘Theory Building From Cases: Opportunities and Challenges’, Academy of Management Journal 50: 25–32.
Faems, D., Janssens, M., Madhok, A. and Van Looy, B. (2008) ‘Towards an Integrative Perspective on Alliance Governance: Connecting Contract Design, Contract Application, and Trust Dynamics’, Academy of Management Journal 51 (6): 1053–78.
Foss, N. J. (2003) ‘Bounded Rationality in the Economics of Organization: “Much Cited and Little Used”’, Journal of Economic Psychology 24(2): 245–64.
Friedlander, F. (1983) ‘Patterns of Individual and Organizational Learning’, in S. Srivastva (ed) The Executive Mind: New Insights on Managerial Thought and Action, pp. 192–220. San Francisco: Jossey-Bass.
Garud, R., Dunbar, R. L. M. and Bartel, C. A. (2011) ‘Dealing with Unusual Experiences: A Narrative Perspective on Organizational Learning’, Organization Science. Forthcoming.
Gilson, R. J. (1984) ‘Value Creation by Business Lawyers: Legal Skills and Asset Pricing’, Yale Law Journal 94: 239–313.
Golden, B. R. (1992) ‘The Past Is the Past – Or Is It? The Use of Retrospective Accounts as Indicators of Past Strategy’, Academy of Management Journal 35(4): 848–60.
Grant, R. M. (1996) ‘Toward a Knowledge-Based Theory of the Firm’, Strategic Management Journal 17: 109–22.
Greve, H. R. (2003) Organizational Learning from Performance Feedback. Cambridge, UK: Cambridge University Press.
Grossman, S. and Hart, O. (1986) ‘The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration’, Journal of Political Economy 94: 691–719.
Gulati, R. and Nickerson, J. (2008) ‘Interorganizational Trust, Governance Choice, and Exchange Performance’, Organization Science 19: 688–708.
Hamel, G. (1991) ‘Competition for Competence and Interpartner Learning within International Strategic Alliances’, Strategic Management Journal 12: 83–103.
Hart, O. and Moore, J. (1988) ‘Incomplete Contracts and Renegotiation’, Econometrica 56(4): 755–85.
Heimeriks, K. H. (2010) ‘Confident or Competent? How to Avoid Superstitious Learning in Alliance Portfolios’, Long Range Planning 43(1): 57–84.
Heimeriks, K. H. and Duysters, G. M. (2007) ‘Alliance Capability as Mediator between Experience and Alliance Performance: An Empirical Investigation into the Alliance Capability Development Process’, Journal of Management Studies 44(1): 25–49.
Holmström, B. and Milgrom, P. (1991) ‘Multi-Task Principal-Agent Analysis’, Journal of Law, Economics, & Organization 7: 24–52.
Huber, G. P. (1991) ‘Organizational Learning: The Contributing Process and the Literatures’, Organization Science 2: 88–115.
Husted, B. W. and Folger, R. (2004) ‘Fairness and Transaction Costs: The Contribution of Organizational Justice Theory to an Integrative Model of Economic Organization’, Organization Science 15(6): 719–29.
Inkpen, A. C. (2000) ‘Learning Through Joint Ventures: A Framework of Knowledge Acquisition’, Journal of Management Studies 37(7): 1019–43.
Inkpen, A. C. (2002) ‘Learning, Knowledge Management, and Strategic Alliances: So Many Studies, So Many Unanswered Questions’, In P. Lorange and F. Contractor (eds) Cooperative Strategies and Alliances, pp. 267–89. Oxford, UK: Elsevier Science.
Inkpen, A. C. and Currall, S. C. (2004) ‘The Co-Evolution of Trust, Control, and Learning in Joint Ventures’, Organization Science 15: 586–99.
Inkpen, A. C. and Tsang, E. W. K. (2007) ‘Learning and Strategic Alliances’, Academy of Management Annals 1: 479–511.
Jensen, M. C. and Meckling, W. H. (1976) ‘Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure’, Journal of Financial Economics 3: 305–60.
Joskow, P. L. (1987) ‘Contract Duration and Relationship-Specific Investments: Empirical Evidence From Coal Markets’, American Economic Review 77(1): 168–85.
Kale, P., Dyer, J. H. and Singh, H. (2002) ‘Alliance Capability, Stock Market Response, and Long Term Alliance Success: The Role of the Alliance Function’, Strategic Management Journal 23(8): 747–67.
Kale, P. and Singh, H. (2007) ‘Building Firm Capabilities Through Learning: The Role of the Alliance Learning Process in Alliance Capability and Firm-Level Alliance Success’, Strategic Management Journal 28(10): 981–1000.
Kale, P., Singh, H. and Perlmutter, H. (2000) ‘Learning and Protection of Proprietary Assets in Strategic Alliances: Building Relational Capital’, Strategic Management Journal 21: 217–37.
Kalnins, A. and Mayer, K. J. (2004) ‘Relationships and Hybrid Contracts: An Analysis of Contract Choice in Information Technology’, Journal of Law, Economics, & Organization 20(1): 207–29.
Kellogg, K. C., Orlikowski, W. J. and Yates, J. (2006) ‘Life in the Trading Zone: Structuring Coordination Across Boundaries in Postbureaucratic Organizations’, Organization Science 17(1): 22–44.
Khanna, T., Gulati, R. and Nohria, N. (1998). ‘The Dynamics of Learning Alliances: Competition, Cooperation, and Relative Scope’, Strategic Management Journal 19: 193–210.
Kim, J. Y., Kim, J. Y., and Miner, A. S. (2009) ‘Organizational Learning from Extreme Performance Experience: The Impact of Success and Recovery Experience’, Organization Science 20(6): 958–78.
Kim, J. and Mahoney, J. T. (2010) ‘A Strategic Theory of the Firm as a Nexus of Incomplete Contracts: A Property Rights Approach’, Journal of Management 36: 806–26.
Kim, J. Y. and Miner, A. S. (2007) ‘Vicarious Learning from the Failures and Near-Failures of Others: Evidence from the U.S. Commercial Banking Industry’, Academy of Management Journal 50(3): 687–714.
Konrad, A. M. and Linnehan, F. (1995) ‘Formalized HRM Structures: Coordinating Equal Employment Opportunity or Concealing Organizational Practices?’, Academy of Management Journal 38: 787–820.
Koza, M. P. and Lewin, A. Y. (1998) ‘The Co-evolution of Strategic Alliances’, Organization Science 9(3): 255–64.
Kumar, R. and Nti, K. O. (1998) ‘Differential Learning and Interaction in Alliance Dynamics: A Process and Outcome Discrepancy Model’, Organization Science 9: 356–67.
Langley, A. (1999) ‘Strategies for Theorizing From Process Data’, Academy of Management Review 24: 691–710.
Levitt, B. and March, J. (1988) ‘Organizational Learning’, Annual Review of Sociology 14: 319–40.
Li, J. J., Poppo, L. and Zhou, K. Z. (2010) ‘Relational Mechanisms, Formal Contracts, and Local Knowledge Acquisition by International Subsidiaries’, Strategic Management Journal 31(4): 349–70.
Llewellyn, K. (1931) ‘What Price Contract? An Essay in Perspective’, Yale Law Journal 40: 704–51.
Lumineau, F. and Malhotra, D. (2011) ‘Shadow of the Contract: How Contract Structure Shapes Inter-Firm Dispute Resolution’, Strategic Management Journal. Forthcoming.
Macneil, I. R. (1980) The New Social Contract: An Inquiry Into Modern Contractual Relations. New Haven, CT: Yale University Press.
Malhotra, D. and Lumineau, F. (2011) ‘Trust and Collaboration in the Aftermath of Conflict: The Effects of Contract Structure’, Academy of Management Journal. Forthcoming.
March, J. G. (2009) The Ambiguities of Experience. Ithaca, NY: Cornell University Press.
March, J. G., Sproull, L. S. and Tamuz, M. (1991) ‘Learning From Samples of One or Fewer’ Organization Science 2: 1–13.
Mayer, K. J. and Argyres, N. S. (2004) ‘Learning to Contract: Evidence from the Personal Computer Industry’, Organization Science 15(4): 394–410.
Mayer, K. J. and Bercovitz, J. (2008) ‘The Influence of Inertia on Contract Design: Contingency Planning in Information Technology Service Contracts’, Managerial & Decision Economics 29: 149–63.
Michalski, R. S. (1994) ‘Inferential Theory of Learning: Developing Foundations for Multistrategy Learning’, in R. S. Michalski and G. Tecuci (eds) Machine Learning: A Multistrategy Approach, pp. 3–61. San Mateo, CA: Morgan Kaufmann.
Miller, G. A. (1956) ‘The Magical Number Seven, Plus or Minus Two: Some Limits on Our Capacity for Information Processing’, Psychological Review 63: 81–97.
Miner, A. S. and Mezias, S. J. (1996) ‘Ugly Duckling No More: Pasts and Futures of Organizational Learning Research’, Organization Science, 7(1): 88–99.
Oldroyd, J. B. and Gulati, R. (2010) ‘A Learning Perspective on Intraorganizational Knowledge Spill-Ins’, Strategic Entrepreneurship Journal 4: 356–72.
Parkhe, A. (1993) ‘Strategic Alliances Structuring: A Game Theoretic and Transaction Cost Examination of Interfirm Cooperation’, Academy of Management Journal 36(4): 794–829.
Prange, C. (1999) ‘Organizational Learning – Desperately Seeking Theory?’ in M. Easterby-Smith, L. Araujo and J. Burgoyne (eds) Organizational Learning and the Learning Organization, pp. 23–44. London: Sage.
Poppo, L. and Zenger, T. (2002) ‘Do Formal Contracts and Relational Governance Function as Substitutes or Complements?’, Strategic Management Journal 23(8): 707–26.
Reuer, J. J. and Ariño, A. (2007) ‘Strategic Alliance Contracts: Dimensions and Determinants of Contractual Complexity’, Strategic Management Journal 28(3): 313–30.
Reuer, J. J., Zollo, M. and Singh, H. (2002) ‘Post-Formation Dynamics in Strategic Alliances’, Strategic Management Journal 23(2): 135–51.
Ricoeur, P. 1984. Time and Narrative. Chicago: University of Chicago Press.
Ring, P. S. (1997) ‘Processes Facilitating Reliance on Trust in Inter-Organizational Networks’, In M. Ebers (ed) The Formation of Inter-Organizational Networks, pp. 113–45. Oxford, UK: Oxford University Press.
Ring, P. S. (2002) ‘The Role of Contracts in Strategic Alliances’, In F. J. Contractor and P. Lorange (eds) Cooperative Strategies and Strategic Alliances, pp. 145–62. London, UK: Elsevier Science.
Ring, P. S. (2006) ‘Designing Alliance Contracts: The Role of Detailed Task Descriptions’, in A. Ariño and J. J. Reuer (eds) Strategic Alliances: Governance and Contracts, pp. 173–83. London, UK: Palgrave Macmillan.
Ring, P. S. and Van de Ven, A. H. (1992) ‘Structuring Cooperative Relationships Between Organizations’, Strategic Management Journal 13: 483–98.
Ring, P. S. and Van de Ven, A. H. (1994) ‘Developmental Processes of Cooperative Interorganizational Relationships’, Academy of Management Review 19(1): 90–118.
Ryall, M. D. and Sampson, R. C. (2009) ‘Formal Contracts in the Presence of Relational Enforcement Mechanisms: Evidence From Technology Development Projects’, Management Science 55: 906–25.
Salk, J. E. (2005) ‘Often Called For But Rarely Chosen: Alliance Research that Directly Studies Process’, European Management Review 2(2): 117–22.
Sampson, R. C. (2004) ‘The Cost of Misaligned Governance in R&D Alliances’, Journal of Law, Economics, & Organization 20(2): 484–526.
Sarkar, M. B., Aulakh, P. S. and Madhok, A. (2009) ‘Process Capabilities and Value Generation in Alliance Portfolios’, Organization Science 20(3): 583–600. Sawyer, R. K. (1999) ‘The Emergence of Creativity’, Philosophical Psychology 12(4): 447–69.
Simonin, B. L. (1997) ‘The Importance of Collaborative Know-How: An Empirical Test of the Learning Organization’, Academy of Management Journal 40(5): 1150–74.
Suchman, M. C. (2003) ‘The Contract as Social Artifact’, Law & Society Review 37(1): 91–142.
Szulanski, G., Porac, J. and Doz, Y. (2005) Strategy Process. Advances in Strategic Management, Volume 22. Oxford, UK: Elsevier.
Terlaak, A. and Gong, Y. (2008) ‘Vicarious Learning and Inferential Accuracy in Adoption Processes’, Academy of Management Review 33(4): 846–68.
Tsoukas, H. (2009) ‘A Dialogical Approach to the Creation of New Knowledge in Organizations’, Organization Science 20(6): 941–57.
Van de Ven, A. (1992) ‘Suggestions for Studying Strategy Research’, Strategic Management Journal 13: 169–88.
Van der Velde, M., Jansen, P. and Anderson, N. (2004) Guide to Management Research Methods. Oxford, UK: Blackwell Publishing.
Van Maanen, J. (1979) ‘The Fact of Fiction in Organizational Ethnography’, Administrative Science Quarterly 24: 539–50.
Vanneste, B. S. and Puranam, P. (2010) ‘Repeated Interactions and Contractual Detail: Identifying the Learning Effect’, Organization Science 21: 186–201.
Vlaar, P. W. L., Klijn, E., Ariño, A. and Reuer, J. J. (2010) ‘Pre-Formation Processes in Interorganizational Relations: Determinants of Search and Negotiation Efforts’, In T. K. Das (ed) Researching Strategic Alliances: Emerging Perspectives. Information Age Publishing.
Vlaar, P. W. L., Van Den Bosch, F. A. J. and Volberda, H. W. (2007) ‘On the Evolution of Trust, Distrust, and Formal Coordination and Control in Interorganizational Relationships: Toward an Integrative Framework’, Group & Organization Management 32: 407–31.
Weber, L. and Mayer, K. J. (2011) ‘Designing Effective Contracts: Exploring the Influence of Framing and Expectations’, Academy of Management Review 36.
Weber, L., Mayer, K. J. and Macher, J. T. (2011) ‘An Analysis of Extendibility and Early Termination Provisions: The Importance of Framing Duration Safeguards’, Academy of Management Journal 54.
Weber, L., Mayer, K. J. and Wu, R. (2009) ‘The Future of Interfirm Contract Research: Opportunities Based on Prior Research and Nontraditional Tools’, Advances in Strategic Management 26: 123–45.
Williamson, O. E. (1975) Markets and Hierarchies: Analysis and Antitrust Implications. New York: Free Press.
Williamson, O. E. (1985) The Economic Institutions of Capitalism: Firms, Markets, Relational Contracting. New York: Free Press.
Williamson, O. E. (1999) ‘Strategy Research: Governance and Competence Perspectives’, Strategic Management Journal 20: 1087–1108.
Yin, R. K. (2009) Case Study Research: Design and Methods. Newbury Park, CA: Sage.
Zajac, E. J. and Olsen, C. P. (1993) ‘From Transaction Cost to Transactional Value Analysis: Implications for the Study of Interorganizational Strategies’, Journal of Management Studies 31: 131–45.
Zollo, M., Reuer, J. J. and Singh, H. (2002) ‘Interorganizational Routines and Performance in Strategic Alliances’, Organization Science 13(6): 701–13.
Zollo, M. and Singh, H. (2004) ‘Deliberate Learning in Corporate Acquisitions: Post-Acquisition Strategies and Integration Capability in US Bank Mergers’, Strategic Management Journal 25(13): 1233–56.
Zollo, M. and Winter, S. G. (2002) ‘Deliberate Learning and the Evolution of Dynamic Capabilities’, Organization Science 13(3): 339–51.