The co-design of contractual and extra-contractual governance: lessons from the project-based economy

Grandori, A. and Furlotti, M. ORCID: 0000-0001-6750-9547, 2008. The co-design of contractual and extra-contractual governance: lessons from the project-based economy. In: 12th Annual Conference of ISNIE (International Society for New Institutional Economics, Toronto, Canada, 20-21 June 2008.


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Organizational economics tends to express a pessimistic view on the effectiveness of inter-firm contracts under uncertainty, and sees the use of authority and of relational governance as possible remedies. Organization theory inspires some skepticism on the effectiveness of these therapies. In particular, it identifies also reasons to expect a sustained level of formalization in strategic alliances and, conversely, to expect a moderate use of centralization. To help filling this gap, this study empirically assesses the relationship between uncertainty and complexity in the context of strategic alliances, and the use of formalization and centralization for their governance. The assessment extends to the intensity of use and the relationships of three modes of governance: contractual, formal extra-contractual, and informal and social. This exercise is carried out on a new database that collects in formation on 540 project-based alliances. We find that inter-organizational projects employ a mix of contractual and extra-contractual governance mechanisms. Different from usual conceptualization, these agreements are not characterized by high informality. Extra contractual governance seems to be employed to respond to additional factors, rather than to substitute or complement formal agreements. Finally, the pattern of allocation of property rights also interestingly deviates from standard property right theory predictions, to conform to a more pluralist, negotiation based view.

Item Type: Conference contribution
Creators: Grandori, A. and Furlotti, M.
Date: June 2008
Divisions: Schools > Nottingham Business School
Record created by: Linda Sullivan
Date Added: 17 Oct 2018 14:06
Last Modified: 17 Oct 2018 14:06

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