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Empirical Relevance of Efficient Contract Theory: Inter-firm Contracts

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  • Lyons, Bruce R
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    Abstract

    Although there has been enormous development of the theory of efficient contracts in the last 20 years, empirical tests were slow to come. However, over the last 10 years, a considerable body of evidence has accumulated, particularly in relation to contracts between firms. This paper develops a simple, integrated theoretical framework to illustrate 11 testable hypotheses. The contract theories covered include risksharing, principal-agent incentive models, transaction cost and incomplete contract models with specific investment, and the theory of relational contracting. The problems associated with empirical work on contracts are discussed before setting the hypotheses against a wide range of econometric and other empirical evidence (including work on franchising, sharecropping, subcontracting, contract duration, private institutions, experimental evidence, and a wide range of case studies). Copyright 1996 by Oxford University Press.

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    Bibliographic Info

    Article provided by Oxford University Press in its journal Oxford Review of Economic Policy.

    Volume (Year): 12 (1996)
    Issue (Month): 4 (Winter)
    Pages: 27-52

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    Handle: RePEc:oup:oxford:v:12:y:1996:i:4:p:27-52

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    Cited by:
    1. Benito Arruñada & Luis Vázquez & Giorgio Zanarone, 2009. "Institutional constraints on organizations: the case of Spanish car dealerships," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 30(1), pages 15-26.
    2. Gérard Charreaux, 2000. "L'approche économico-financière de l'investissement: une vision critique," Working Papers CREGO 1000501, Université de Bourgogne - CREGO EA7317 Centre de recherches en gestion des organisations.
    3. López-Bayón, Susana & González-Díaz, Manuel, 2010. "Indefinite contract duration: Evidence from electronics subcontracting," International Review of Law and Economics, Elsevier, vol. 30(2), pages 145-159, June.
    4. Krol, Noortje & Polman, Nico & Peerlings, Jack & Nikolov, Dimitre, 2010. "Changing governance in the EU milk supply chain," IAMO Forum 2010: Institutions in Transition – Challenges for New Modes of Governance 52703, Leib­niz Institute of Agricultural Development in Central and Eastern Europe (IAMO).
    5. Oliver E. Williamson, 2002. "The Theory of the Firm as Governance Structure: From Choice to Contract," Journal of Economic Perspectives, American Economic Association, vol. 16(3), pages 171-195, Summer.
    6. Francine Lafontaine & Kathryn L. Shaw, 2005. "Targeting Managerial Control: Evidence from Franchising," RAND Journal of Economics, The RAND Corporation, vol. 36(1), pages 131-150, Spring.
    7. Frank Bickenbach & Lars Kumkar & Rüdiger Soltwedel, 1999. "The New Institutional Economics of Antitrust and Regulation," Kiel Working Papers 961, Kiel Institute for the World Economy.
    8. Thomas Mellewigt & Anoop Madhok & Antoinette Weibel, 2007. "Trust and formal contracts in interorganizational relationships - substitutes and complements," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(8), pages 833-847.
    9. Francine Lafontaine & Joanne Oxley, 2001. "International Franchising: Evidence from US and Canadian Franchisors in Mexico," NBER Working Papers 8179, National Bureau of Economic Research, Inc.
    10. Guo, Hongdong & Jolly, Robert W., 2008. "Contractual arrangements and enforcement in transition agriculture: Theory and evidence from China," Food Policy, Elsevier, vol. 33(6), pages 570-575, December.
    11. Hu, Yifan & Qiu, Larry D., 2010. "An empirical analysis of contracting by Chinese firms," China Economic Review, Elsevier, vol. 21(3), pages 423-431, September.
    12. Szabó G., Gábor & Bárdos, Krisztina, 2007. "Szerződéses kapcsolatok az élelmiszer-gazdaságban. A tejellátási lánc empirikus kutatása
      [Contract relations in the food economy. Empirical research into the milk-market supply channel]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(5), pages 459-480.
    13. Vosselman, Ed & Meer-Kooistra, Jeltje van der, 2009. "Accounting for control and trust building in interfirm transactional relationships," Accounting, Organizations and Society, Elsevier, vol. 34(2), pages 267-283, February.
    14. Beckmann, Volker & Boger, Silke, 2003. "Courts And Contract Enforcement In Transition Agriculture: Theory And Evidence From Poland," 2003 Annual Meeting, August 16-22, 2003, Durban, South Africa 25878, International Association of Agricultural Economists.
    15. Beckmann, Volker & Boger, Silke, 2003. "Courts And Contract Enforcement In Agricultural Transition - Theory And Evidence From Poland," 2003 Annual meeting, July 27-30, Montreal, Canada 22213, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    16. Steven Globerman & Aidan Vining, 2004. "The Outsourcing Decision: A Strategic Framework," International Trade 0404007, EconWPA.

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