An organizational learning perspective on the contracting process

Abstract

The contracting process is a crucial step in alliance development and its success. However, the existing literature reveals surprisingly little investigation into how organizational learning relates to the process of contract making. We therefore conducted an in-depth longitudinal study of the alliance contracting process in the animated film industry. First, our findings suggest that during the contracting process, firms can learn about the way to deal with the contracting process, about themselves and their partner, and about the transaction features. Second, the case analysis indicates a combination of experiential, vicarious, and inferential learning mechanisms. Combining these insights into the objects and the mechanisms of learning during the contracting process, we discuss how contracting and learning processes are related and analyze the role of the contracting process in supporting organizational learning. The findings show that the drafting of contractual clauses fosters learning and, in turn, this learning triggers new contractual negotiations. Hence we suggest that the alignment between transaction features and the choice of contractual governance results from learning during the contracting process. We then propose avenues for future research. KeywordsContracting process; strategic alliances; organizational learning; longitudinal case study 3 Acknowledging that contracts account for a substantial part of future alliance performance, strategy and organization researchers have paid increasing attention to the structure of alliance contracts (e.g. Lumineau and Malhotra, 2011;Reuer and Ariño, 2007; see Weber, Mayer, and Wu, 2009, for a recent review). Scholars have in particular started to explore how learning relates to contracts (Argyres, Bercovitz, and Mayer, 2007; Dekker and Van den Abbeele, 2010;Mayer and Argyres, 2004;Ryall and Sampson, 2009;Vanneste and Puranam, 2010). Prior research has generally analyzed learning effects from one contract to the next. It has been suggested that the structures of contracts change over time as the firms gain experience in working together (Argyres et al., 2007;Mayer and Argyres, 2004). However, as the contract is generally seen as an outcome of the parties foreseeing hazards and the focus is mostly on the contractual structure, we still do not know much about what is learned during the contracting process and how this learning occurs.In addition, the processes preceding alliance formation, and particularly the process of contract In this paper, our aim is to develop a better understanding of the links between the contracting process and learning. Our study elaborates on organizational learning (e.g. Argote and MironSpektor, 2011;Inkpen and Tsang, 2007) in order to analyze learning dimensions in the alliance contracting process. While considering the structure and the content of the contract, our approach focuses on the process that the parties use to draft the contract (Macneil, 1980). We seek to improve our knowledge of alliance contracting by studyi...

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“…in terms of objectives and tasks (Lumineau et al, 2011). This can feed into subsequent contractual negotiations (Mayer and Argyres, 2004).…”

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