What drives contract design in alliances? Taking stock and how to proceed

Abstract

We collect and assess prior empirical evidence on contract design in alliances that has been published since Parkhe’s (1993) seminal study on inter-firm contracts. We elaborate on the effects of transaction-related factors, experience gained from prior relationships, and deliberate learning efforts on contracts. Our paper offers three contributions. First, we systematically review the existing literature on alliance contracts and summarize our findings. Second, while prior research has traditionally focused on contractual complexity,we place the content of contracts center stage and identify three contractual functions. While existing studies on contractual functions predominantly refer to safeguarding as a response to appropriation concerns, we also consider coordination and contingency adaptability as outcomes of adaptation concerns. Third, we disentangle the differential influences of previous experiences on distinct contractual functions and show that experience gained from prior relationships has different effects on safeguarding and contingency adaptability than on coordination. Overall, we add to the systematization of the current debate on alliance contract design and trace promising avenues for future research on the impact of transaction- and experience-related factors on the complexity and content of alliance contracts.