Intra-Firm Trade Law - Contract-Enforcement & Dispute Resolution in Transnational Corporations
AbstractWhile intra-firm trade accounts for at least one third of world exports, we know very little about the institutions which are employed to resolve intra-firm trade conflicts. According to Oliver Williamson, courts are not accessible and conflicts resulting from intra-firm trade are resolved by directives based on the authority of ownership instead (law of forbearance). Williamson's description of the law of forbearance, however, depicts an ideal typical form of a firm, which is characterised by low incentive intensity and high administrative costs. Yet, in order to improve on these attributes, large transnational enterprises changed their organisational structure in the past decades. Nowadays, large-scale enterprises usually have a decentralised structure and use intra-firm pricing and incentive systems. Against this backdrop, Williamson's description of the contract law regime of intra-firm trade appears all too general. This paper addresses the question of how contract enforcement in transnational corporations is institutionally organized on the basis of preliminary results of expert interviews conducted with officials from transnational corporations. In a first step we illustrate that conflicts originating in intra-firm transactions are basically of the same type and nature than conflicts arising out of market transactions. We argue that the settlement of these disputes is of relevance both for legal (e.g. corporate and tax law) and economic reasons (e.g. coordination, control and motivation functions of profit centers). In a second step we analyze the governance mechanisms which are employed by transnational corporations to resolve intra-firm trade conflicts.
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Bibliographic InfoPaper provided by ZenTra - Center for Transnational Studies in its series ZenTra Working Papers in Transnational Studies with number 01.
Length: 32 pages
Date of creation: Oct 2012
Date of revision: Oct 2012
transaction cost economics; intra-firm trade; private ordering; alternative dispute resolution; mediation; arbitration; transnational law;
Find related papers by JEL classification:
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- D29 - Microeconomics - - Production and Organizations - - - Other
- D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances
- K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
- K40 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - General
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
- M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-11-03 (All new papers)
- NEP-HME-2012-11-03 (Heterodox Microeconomics)
- NEP-LAW-2012-11-03 (Law & Economics)
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