Institutionalizing Industry: The Changing Forms of Contract

Abstract

A replication of Macaulay's 1963 study of Wisconsin manufacturers shows that manufacturers are using a new type of contract to govern changed transactions and to establish new form of industrial organization. This article seeks to specify these changes and to demonstrate their theoretical significance by constructing an empirically and theoretically informed analytical framework. This framework establishes relations of meaning between discrete contracts, job shop production, and classical contract law; between openterm contracts, mass production, and neoclassical contract law; and between long‐term agreements, flexible production, and a “shadow” relational contract law. It demonstrates that long‐term agreements constitute a new device for governing exchange, that they are part of a broader change from mass production to flexible production, and that their distinctive features are not recognized by neoclassical contract law.

Internationalization, market forces and domestic sectoral institutionalization

“…Owing to the strong effect of institutional norms on the market entrance modes of companies (Davis et al , 2000), an international company needs to act within the social and cultural context, and has to be well prepared to compete successfully (Melin, 1992). When developing their market positions, the organizations both: adopt the values, norms, concepts, system models and cognitive processes from the broader social context; and are simultaneously evaluated according to these (Esser, 1996). Conclusively, it can be stated that, referring to the “external driver” perception, the enterprises within the respective industrial structure are required to adapt to the given institutional structures.…”

When Businesses Sue Each Other: An Empirical Study of State Court Litigation

“…It does not necessarily contradict other theories of business litigation. For example, recent empirical work has focused on the dominant mode of contracting in specific industries (Esser 1996). An emphasis on the importance of contract and exchange norms is wholly complementary to the theory presented here.…”

“…Despite the mix of reasonable theoretical arguments that suggest otherwise, litigation between firms is not a rarity. This empirical regularity has resulted in a renewed interest in the study of interfirm conflict and business litigation (Dunworth and Rogers 1996;Kenworthy, Macaulay, and Rogers 1996;Esser 1996). The evolving field demonstrates the continued importance of economic context, contract norms, and the existence of ongoing business relations as factors in the decision for firms to resort to litigation (Kaufman and Stem 1989).…”

“…The current literature tends to emphasize either aggregate trends (Dunworth and Rogers 1996) or industry specific study (Macaulay 1963;Esser 1996;Kenworthy, Macaulay, and Rogers 1996). Both these methods have resulted in useful insights into the phenomenon of business disputing and litigation; however, such methods make cross-industry comparison difficult.6 Because litigation between firms is rooted in economic activity, understanding the relationship between industry divisions and disputing behavior is critical.…”

Markets and Corporate Conflict: A Substitution-Cost Approach to Business Litigation

“…As a result, preserving the business relationship receives priority over winning the conflict. Most game theoretic models that highlight the potential of repeated interaction to engender cooperative behavior lend support to the general proposition.1 Recently, a number of articles have followed in the Macaulay tradition (Esser 1996;Kenworthy, Macaulay, and Rogers 1996). In general, they provide support for Macaulay's original conclusions.…”