From Incentives to Control to Adaptation: Exploring Interactions between Formal and Relational Governance

George Baker, Robert Gibbons and Kevin J. Murphy

Journal of Institutional and Theoretical Economics (JITE), 2023, vol. 179, issue 3-4, 500-529

Abstract: In 1991 we began to model interactions between formal and relational incentive contracts. We saw this work as agency theory. By the time the paper was published (BGM, 1994), we had begun to view the research agenda more broadly - with connections to organizational culture, the theory of firms' boundaries, and more. Eventually, we built from this initial work, analyzing delegation within organizations as necessarily informal and moving beyond relational agency to structuring relationships (where parties choose their formal governance structure to facilitate their relational contract). In this essay we sketch theoretical, empirical, and methodological lessons we learned during this twenty-year journey.

Keywords: relational contracts; formal governance structure; incentives; control; adaptation; relationalcontracts; formalgovernancestructure (search for similar items in EconPapers)
JEL-codes: D21 D23 L14 L23 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Working Paper: From Incentives to Control to Adaptation: Exploring Interactions Between Formal and Relational Governance (2022)
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DOI: 10.1628/jite-2023-0041

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