Scaffolding: Using Formal Contracts to Build Informal Relations in Support of Innovation. Hadfield, G. K. & Bozovic, I. 2012. ![Scaffolding: Using Formal Contracts to Build Informal Relations in Support of Innovation [link]](https://bibbase.org/img/filetypes/link.svg "link")
Paper abstract bibtex Is it still the case that formal contracts are largely remote from day-to-day management of transactional relationships? Using a preliminary series of 30 interviews we find that in traditional stable industries, much like Macaulay (1963) suggested, little is invested in detailed contracting and unexpected contingencies are handled with little reference to contract language. Contracting partners in these relationships do not resort to formal court enforcement, relying instead on informal mechanisms such as reputation, repeat business, and norms to secure their agreements. We also found evidence, in contrast, that in industries with high rates of innovation, even though contracting partners continue to rely on informal rather than formal enforcement mechanisms, they make substantial use of formal documents and legal advice to plan and manage their relationships. To understand this twist on Macaulay’s results, we develop a model that shows the relationship between formal contracting and informal enforcement mechanisms. We show that formal contracts and contract doctrine can serve as a mechanism by which, as the relationship evolves, classification of conduct as breach or not can be reached. With this common classification scheme, parties can use the simple set of strategies and a simple belief system to support an equilibrium in which breach is deterred through informal enforcement. We call this role for formal contracting scaffolding and claim that it provides a support system for the efficacy of informal enforcement mechanisms, including the endogenous development of trust, on which the relationship depends, precisely in settings subject to significant ambiguity and unpredictable change.
@unpublished{hadfield_scaffolding:_2012,
title = {Scaffolding: {Using} {Formal} {Contracts} to {Build} {Informal} {Relations} in {Support} of {Innovation}},
url = {http://law.bepress.com/cgi/viewcontent.cgi?article=1217&context=usclwps-lewps},
abstract = {Is it still the case that formal contracts are largely remote from day-to-day management
of transactional relationships? Using a preliminary series of 30 interviews
we find that in traditional stable industries, much like Macaulay (1963) suggested,
little is invested in detailed contracting and unexpected contingencies are handled
with little reference to contract language. Contracting partners in these relationships
do not resort to formal court enforcement, relying instead on informal mechanisms
such as reputation, repeat business, and norms to secure their agreements.
We also found evidence, in contrast, that in industries with high rates of innovation,
even though contracting partners continue to rely on informal rather than
formal enforcement mechanisms, they make substantial use of formal documents
and legal advice to plan and manage their relationships. To understand this twist
on Macaulay’s results, we develop a model that shows the relationship between
formal contracting and informal enforcement mechanisms. We show that formal
contracts and contract doctrine can serve as a mechanism by which, as the relationship
evolves, classification of conduct as breach or not can be reached. With
this common classification scheme, parties can use the simple set of strategies
and a simple belief system to support an equilibrium in which breach is deterred
through informal enforcement. We call this role for formal contracting scaffolding
and claim that it provides a support system for the efficacy of informal enforcement
mechanisms, including the endogenous development of trust, on which the
relationship depends, precisely in settings subject to significant ambiguity and
unpredictable change.},
urldate = {2016-06-23TZ},
author = {Hadfield, Gillian K. and Bozovic, Iva},
year = {2012}
}
Downloads: 0
{"_id":"FSj6AoXhZLxerrxPS","bibbaseid":"hadfield-bozovic-scaffoldingusingformalcontractstobuildinformalrelationsinsupportofinnovation-2012","downloads":0,"creationDate":"2018-03-23T23:14:41.510Z","title":"Scaffolding: Using Formal Contracts to Build Informal Relations in Support of Innovation","author_short":["Hadfield, G. K.","Bozovic, I."],"year":2012,"bibtype":"unpublished","biburl":"https://api.zotero.org/users/310308/collections/ZKI4K7J6/items?key=TGTZExtEDUfToT3raZwLP4VB&format=bibtex&limit=100","bibdata":{"bibtype":"unpublished","type":"unpublished","title":"Scaffolding: Using Formal Contracts to Build Informal Relations in Support of Innovation","url":"http://law.bepress.com/cgi/viewcontent.cgi?article=1217&context=usclwps-lewps","abstract":"Is it still the case that formal contracts are largely remote from day-to-day management of transactional relationships? Using a preliminary series of 30 interviews we find that in traditional stable industries, much like Macaulay (1963) suggested, little is invested in detailed contracting and unexpected contingencies are handled with little reference to contract language. Contracting partners in these relationships do not resort to formal court enforcement, relying instead on informal mechanisms such as reputation, repeat business, and norms to secure their agreements. We also found evidence, in contrast, that in industries with high rates of innovation, even though contracting partners continue to rely on informal rather than formal enforcement mechanisms, they make substantial use of formal documents and legal advice to plan and manage their relationships. To understand this twist on Macaulay’s results, we develop a model that shows the relationship between formal contracting and informal enforcement mechanisms. We show that formal contracts and contract doctrine can serve as a mechanism by which, as the relationship evolves, classification of conduct as breach or not can be reached. With this common classification scheme, parties can use the simple set of strategies and a simple belief system to support an equilibrium in which breach is deterred through informal enforcement. We call this role for formal contracting scaffolding and claim that it provides a support system for the efficacy of informal enforcement mechanisms, including the endogenous development of trust, on which the relationship depends, precisely in settings subject to significant ambiguity and unpredictable change.","urldate":"2016-06-23TZ","author":[{"propositions":[],"lastnames":["Hadfield"],"firstnames":["Gillian","K."],"suffixes":[]},{"propositions":[],"lastnames":["Bozovic"],"firstnames":["Iva"],"suffixes":[]}],"year":"2012","bibtex":"@unpublished{hadfield_scaffolding:_2012,\n\ttitle = {Scaffolding: {Using} {Formal} {Contracts} to {Build} {Informal} {Relations} in {Support} of {Innovation}},\n\turl = {http://law.bepress.com/cgi/viewcontent.cgi?article=1217&context=usclwps-lewps},\n\tabstract = {Is it still the case that formal contracts are largely remote from day-to-day management\nof transactional relationships? Using a preliminary series of 30 interviews\nwe find that in traditional stable industries, much like Macaulay (1963) suggested,\nlittle is invested in detailed contracting and unexpected contingencies are handled\nwith little reference to contract language. Contracting partners in these relationships\ndo not resort to formal court enforcement, relying instead on informal mechanisms\nsuch as reputation, repeat business, and norms to secure their agreements.\nWe also found evidence, in contrast, that in industries with high rates of innovation,\neven though contracting partners continue to rely on informal rather than\nformal enforcement mechanisms, they make substantial use of formal documents\nand legal advice to plan and manage their relationships. To understand this twist\non Macaulay’s results, we develop a model that shows the relationship between\nformal contracting and informal enforcement mechanisms. We show that formal\ncontracts and contract doctrine can serve as a mechanism by which, as the relationship\nevolves, classification of conduct as breach or not can be reached. With\nthis common classification scheme, parties can use the simple set of strategies\nand a simple belief system to support an equilibrium in which breach is deterred\nthrough informal enforcement. We call this role for formal contracting scaffolding\nand claim that it provides a support system for the efficacy of informal enforcement\nmechanisms, including the endogenous development of trust, on which the\nrelationship depends, precisely in settings subject to significant ambiguity and\nunpredictable change.},\n\turldate = {2016-06-23TZ},\n\tauthor = {Hadfield, Gillian K. and Bozovic, Iva},\n\tyear = {2012}\n}\n\n","author_short":["Hadfield, G. K.","Bozovic, I."],"key":"hadfield_scaffolding:_2012","id":"hadfield_scaffolding:_2012","bibbaseid":"hadfield-bozovic-scaffoldingusingformalcontractstobuildinformalrelationsinsupportofinnovation-2012","role":"author","urls":{"Paper":"http://law.bepress.com/cgi/viewcontent.cgi?article=1217&context=usclwps-lewps"},"downloads":0,"html":""},"search_terms":["scaffolding","using","formal","contracts","build","informal","relations","support","innovation","hadfield","bozovic"],"keywords":[],"authorIDs":[],"dataSources":["h7bhW89Mf6hpTpvDc"]}