PurposeNew business models, such as life‐cycle contracting, challenge the narrow and static understanding of contracts with hard and precise terms. The aim of this paper is to examine how flexibility could be incorporated into contracting processes.Design/methodology/approachThe data of the paper have been gathered applying the triangular method; first, by interviewing key personnel participating in contracting at eight Finnish firms; second, examining contract and other documents of those companies; and third, studying earlier research on contracting practices. Theoretically, the paper is based on relational contract and proactive approaches to law on the one hand and on organizational studies based on new institutional economics on the other.FindingsFlexibility is often introduced to contracts with relational methods, relying on good personal relationships between business partners or negotiation power and negotiation skills. Contract documents often do not contain mechanisms for dealing with contingencies, or “soft” contract terms. The paper finds the following reasons that may explain this. First, firms heavily rely on model contracts to develop their own templates and the lack of contract models in new business areas hinders firms to develop their templates. Second, unfamiliarity with using soft elements makes it difficult to use them. Additionally, in some cases firms may prefer using relational capability.Research limitations/implicationsThe findings need verification from further multidisciplinary empirical research.Practical implicationsThe findings support firms in developing their contracting capabilities to meet the requirements of the changing business environment and gain competitive advantage from well‐organized contracting.Originality/valueThis paper is one of the first empirical studies comprising also the legal approach.
Purpose – The purpose of this paper is to increase the understanding of the main challenges of the contracting process and project contracts in the context of project business characterized by a high level of complexity and uncertainty. The authors argue that understanding contracting as a flexible process and as a business tool will contribute to creating more value in projects which are implemented in constantly changing circumstances or which require gradual and iterative development. Design/methodology/approach – This is a conceptual paper with illustrative examples from the software industry. Findings – A prevailing approach for both managing contracts and the contracting process focuses on careful planning and drafting of contracts that protect each party in the case of conflicts and disagreements. The underlying assumption is that all activities can be planned and documented in a formal contract. According to this approach, the contracting process is seen only as a bargaining negotiation and the project contract as a detailed agreement of the responsibilities and safeguarding clauses to protect one’s position in the event of conflicts and failures. However, in the context of project business characterized by complexity and uncertainty, there is a need for flexible project contracts. The authors suggest that there are two fundamentally different approaches to implementing flexibility in both the contracting process and the project contract: postponing the decision until there is adequate information for decision making or making decisions that allow flexible adaptation to changes during the project lifecycle. Practical implications – The authors suggest that organizations in project business should pay closer attention to how contracts are formed and how flexibility is introduced to projects. Organizations are encouraged to see contracts as a business tool, not as rigid documents which are taken into use in case something goes wrong. Originality/value – This paper contributes to the understanding of how to adapt the contracting process to overcome challenges related to uncertainty, especially during the early phases of the project lifecycle. The authors provide a novel perspective on contracting as a process that extends over the lifecycle of a project and on the project contract as an agreement between parties formed during the contracting process. This perspective includes formal contract documents as well as various other documents, oral communication, commitments, actions and incidents.
The Arctic currently holds a prominent place in global policy. It is a sparsely populated region experiencing major consequences of global change, such as climate change, shifting demographics, and globalization. These substantial and rapid changes create both opportunities and risks for economic development. Informed policy-making for sustainable development in the Arctic will require an understanding of the specific structures of arctic economies, with a focus on the existence of mixed economies that contain both subsistence and market aspects, the interplay among different economic systems, and the broader contexts in which they function. This paper presents a conceptual framework that allows for comparative analysis of arctic economies within their institutional, social, cultural, and environmental contexts. Utilization of the conceptual framework will enable more complete system-level analyses by helping to describe the complex relationships among apparently disparate parts of the Arctic's diverse economic systems. The framework can be used across the social and natural sciences, practice, and policy-making. Furthermore, this framework is applicable to regions outside of the Arctic that also have distinct mixed subsistence and market economies. Arctic economies and sustainabilityThe Arctic is the northernmost region of Earth, geographically defined as the area within the Arctic Circle, a line of latitude about 66.5°north of the Equator. Definitions of the Arctic vary. According to the Arctic Human Development Report, approximately four million people inhabit the Arctic (Heleniak and Bogoyavlensky, 2014); while the
This article focuses on the participatory rights of local people living in the areas of extensive oil industry operations in the Izhemskii district of the Komi Republic in Russia. The district has long been suffering from oil leaks and resulting negative environmental impacts. Lukoil-Komi bought the business directly after the Soviet era and inherited the ecological threats related to old and rusty pipelines. Lukoil-Komi has promised to put things in order, but a great deal remains to be done.This article scrutinizes how statutory law and private governance interact in protecting the participatory rights of local people living in the vicinity of oil production in Komi. First, we evaluate what participatory rights Russian legislation guarantees to local people when oil production arrives in a new area or when new wells are being explored or opened. Second, we elaborate how the major oil company in the region – Lukoil-Komi – fulfills its corporate social responsibility (CSR) in the area of participatory rights and how local people feel about their possibility to exercise their participatory rights. As participatory rights, we discuss both procedural justice with public hearings and distributive justice in the form of benefit-sharing between the company and local community. The wider perspective on participation is due to Russian CSR practices. In Russia, companies tend to earn their Social License to Operate (SLO) through benefit-sharing, often within private governance. This practice is based on the social partnership agreements between authorities and companies. These contracts have path-dependent features resembling earlier Soviet solutions. The same can be claimed to apply to a wider SLO with more focus on local communities. We argue that Lukoil-Komi has not yet been able to achieve an SLO (local acceptance) due to the lack of participatory rights and continuing environmental problems. Most local people are not willing to trade a clean environment and participatory rights for the social benefits the company offers. However, the social partnership agreement concluded between Lukoil-Komi and a local NGO, Izvatas, could be a step forward in achieving a local SLO.
This study is dedicated to the interaction between oil and gas companies and local communities that depend deeply on the production of oil. One of the key concerns of all oil-dependent communities is the distribution of oil rent: Who participates in decision making regarding the distribution of oil profits and who can claim the benefits and on what grounds? Benefit sharing arrangements are used to decide such matters in global practice. Using Russian Arctic and subarctic areas as examples, we analyze the main rules and practices of the distribution of benefits from oil production at the local level. This study focuses on the coexistence of oil companies and indigenous people, many of whom practice a traditional way of life. We also pay attention to the institutionalization of the norms and rules of oil-dependent communities at the local level.
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