Contracts, Negotiation, and Learning: An Examination of Termination Provisions

Abstract

Taking a temporal view of learning in partnerships, we argue that learning to contract from prior relationships can be manifested not only in an increase in the level of contractual detail but also in a decrease in negotiation time for a given level of contractual detail. We analyse the influence that the length of prior relationships and the detail of termination provisions have on negotiation time, or the time period that it takes for partners to reach a mutually acceptable agreement. We find that: (1) the length of prior relationships has a curvilinear, U‐shaped effect on negotiation time, suggesting the possibility of diverse learning mechanisms as the relationship unfolds; (2) the impact of the detail of termination provisions on negotiation time varies across different types of termination provisions; and (3) it takes a shorter time to negotiate certain types of termination provisions when partners have longer prior relationships. Beyond suggesting the need to investigate the consequences of contractual provisions for collaborators, our study proposes negotiation time as an additional indicator of a learning‐to‐contract effect that complements existing ones.

Trustworthiness Change and Relationship Continuity after Contract Breach in Financial Supply Chains

“…Many studies focus on the initiation (e.g. : Ariño & Ring, ) and termination (e.g., Ariño, Reuer, Mayer, & Jané, ) phases of relationship lifecycles; however, efforts dedicated to the lifecycle management of relationships after formation have not been as popular (Schreiner, Kale, & Corsten, ).The cyclical view of relationships requires a better, and more holistic, understanding of all lifecycle dynamics—including problems (like defaults/breaches) and their impacts. The current interorganizational relationship literature offers scarce exploration of the issues involved in retaining relationships in the aftermath of such a negative incident (Dirks et al., ; Wang, Craighead, & Li, ).…”

“…Many studies focus on the initiation (e.g. : Ariño & Ring, 2010) and termination (e.g., Ariño, Reuer, Mayer, & Jan e, 2014) phases of relationship lifecycles; however, efforts dedicated to the lifecycle management of relationships after formation have not been as popular (Schreiner, Kale, & Corsten, 2009). The cyclical view of relationships requires a better, and more holistic, understanding of all lifecycle dynamics-including problems (like defaults/breaches) and their impacts.…”

Structuring and Governing Alliances: New Directions for Research

“…Weber and Mayer (2011) note, however, that some contract clauses fall into a positive category they call 'promotion framing,' such as contractual provisions that enhance communication, joint work, and alliance performance and rewards. Recent work such as Mayer and Argyres (2004) and Ariño et al (2014) concludes that the strength of the dyadic relationship is not inconsistent with governance and contract complexity-that, in fact, as partners become more familiar with each other, they understand relevant contingencies and are comfortable with more contract detail, especially when contract provisions involve greater specificity regarding task allocation and coordination. We have some ways to go before consensus is achieved on the implications of dyadic experience on contract length and complexity.…”

“…Recent work such as Reuer and Ariño (2007), Ryall and Sampson (2009), Adegbesan and Higgins (2010), Lumineau and Malhotra (2011), and Ariño et al (2014) has begun to specifically examine contract provisions in greater detail. These provisions include criteria for the post-formation governance of the alliance, such as which partner will make which types of decisions (Lerner and Merges, 1998).…”

Learning to contract in public–private partnerships for road infrastructure: recent experiences in Belgium

“…This article advances our understanding of the microdynamics of contracting, a research area that was championed by Ryall and Sampson (2009), Lumineau et al (2011), and Ariño et al (2014. What distinguishes this study from earlier works is its focus on PPP.…”