Empirical relevance of efficient contract theory: inter-firm contracts

Lyons, Bruce

doi:10.1093/oxrep/12.4.27

Cited by 139 publications

(49 citation statements)

References 56 publications

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“…First, firms are more likely to have formal contracts if they are larger in their own industries/markets, and more likely to have relational contracts if they are smaller. This finding is consistent with the 4 For review of the empirical literature, see Lyons (1996) for the earlier empirical literature on efficient contracts and Boerner and Macher's (2002) for the more recent empirical literature on transaction cost economics.…”

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confidence: 83%

An empirical analysis of contracting by Chinese firms

Hu¹,

Qiu²

2010

China Economic Review

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Why do firms use formal contracts or relational contracts with their business partners? The paper uses survey data based on a large number of Chinese firms to uncover some important factors for why and when formal contracts or relational contracts are used. This study identifies geographical location as an important factor in affecting Chinese firms' contracting decisions. We find that a firm is more likely to use formal contracts with its clients and suppliers if they are located in a city different from the firm's main business location. We also find that larger (smaller) firms tend to adopt formal (relational) contracts. However, while the number of clients has a negative impact on a firm's adoption of formal contracts with its clients, the number of suppliers has a positive impact on its adoption of formal contracts with the suppliers.

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supporting

confidence: 83%

An empirical analysis of contracting by Chinese firms

Hu¹,

Qiu²

2010

China Economic Review

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“…By contrast, empirical transaction cost economics has grown exponentially during the past 20 years. For surveys, see Shelanski and Klein (1995), Lyons (1996) 7 Added to this are numerous applications to public policy, especially antitrust and regulation, but also to economics more generally (Dixit, 1996) and to the contiguous social sciences (especially political science). The upshot is that the theory of the firm as governance structure has become a much used construction.…”

Section: Figure 2 Comparative Costs Of Governancementioning

confidence: 99%

The Theory of the Firm as Governance Structure: From Choice to Contract

Williamson

2002

Journal of Economic Perspectives

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T he propositions that organization matters and that it is susceptible to analysis were long greeted by skepticism by economists. To be sure, there were conspicuous exceptions: Alfred Marshall in Industry and Trade (1932), Joseph Schumpeter in Capitalism, Socialism, and Democracy (1942) and Friedrich Hayek (1945 in his writings on knowledge. Institutional economists like Thorstein Veblen (1904), John R. Commons (1934) and Ronald Coase (1937) and organization theorists like Robert Michels (1915 [1962]), Chester Barnard (1938), Herbert Simon (1957a), James March (March and Simon, 1958) and Richard Scott (1992) also made the case that organization deserves greater prominence.One reason why this message took a long time to register is that it is much easier to say that organization matters than it is to show how and why.1 The prevalence of the science of choice approach to economics has also been an obstacle. As developed herein, the lessons of organization theory for economics are both different and more consequential when examined through the lens of contract. This paper examines economic organization from a science of contract perspective, with special emphasis on the theory of the firm.1 A Behavioral Theory of the Firm (Cyert and March, 1963) was one obvious early candidate for an economic theory of organizations. It deals, however, with more fine-grained phenomena-such as predicting department store prices to the penny-than were of interest to most economists. For a discussion, see Williamson (1999b). The recent and growing interest in behavioral economics-which deals more with the theory of consumer behavior than with the theory of the firm-can be interpreted as a delayed response to the lessons of the "Carnegie school" associated with Cyert, March and Simon.

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“…Usually employed by economists, the examination of actual contracts represent an excellent data source for historical and empirical TCE-related research. 17 TCE research using contract data is diverse and examines the decision to contract (Lyons 1996), to the length of contract duration (Joskow 1987) and contract design.…”

Section: Data Collectionmentioning

confidence: 99%

“…Other notable reviews include Lyons (1996), Masten and Saussier (2000) and Rindfleisch and Heide (1997).…”

mentioning

confidence: 99%