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Intra-Firm Trade Law - Contract-Enforcement & Dispute Resolution in Transnational Corporations

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  • Gralf-Peter Calliess

    ()
    (University of Bremen - Faculty of Law & ZenTra)

  • Stephan Freiherr von Harder

    (University of Bremen - Faculty of Law)

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    Abstract

    While 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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    File URL: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2161314
    File Function: First version, 2012
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    Bibliographic Info

    Paper provided by ZenTra - Center for Transnational Studies in its series ZenTra Working Papers in Transnational Studies with number 01 / 2012.

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    Length: 32 pages
    Date of creation: Oct 2012
    Date of revision: Oct 2012
    Handle: RePEc:zen:wpaper:01

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    Related research

    Keywords: transaction cost economics; intra-firm trade; private ordering; alternative dispute resolution; mediation; arbitration; transnational law;

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