Shadow of the contract: how contract structure shapes inter-firm dispute resolution

Fabrice Lumineau and Deepak Malhotra

MPRA Paper from University Library of Munich, Germany

Abstract: This paper investigates how contract structure influences inter-firm dispute resolution processes and outcomes by examining a unique dataset consisting of over 150,000 pages of documents relating to 102 business disputes. We find that the level of contract detail affects the type of dispute resolution approach that is adopted when conflict arises, and that different approaches are associated with different costs for resolving the dispute. We also find that the effect of contract choice on dispute resolution approach is moderated by the degree of coordination required in the relationship, and that the effect of dispute approach on costs is moderated by the degree of power asymmetry between the parties. Thus, even after controlling for various attributes of the exchange relationship and the dispute, the choice of contracting structure has important strategic implications.

Keywords: Contractual Governance; Disputes; Framing; Interest-Based Negotiation and Rights-Based Negotiation; Control and Coordination; Power (search for similar items in EconPapers)
JEL-codes: K40 K41 K42 L14 L22 M10 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-bec, nep-cse and nep-ppm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (62)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:38359

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