Inter-firn Contracts Governing Cooperative Business Relationships

Abstract

Contracts are vital components of the governance mechanism between firms organizing to conduct transactions over a longer-term time horizon. The business management literature has advocated the importance of trust to manage these relationships, beginning with the important research conducted by Macaulay in 1963. On the basis of a case study, it is demonstrated that contracts continue to play an indispensable part of the cooperative business partnership. Business professionals in conjunction with attorneys develop efficiencies organizing by means of contracts as opposed to replacing them with other governance mechanisms. In addition, this study attempts to understand contract design. In particular, it is shown that attorneys consistently design contracts using specific categories of contract provisions when faced with external conditions.