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“Implicit Contracts, incentive compatibility, and involuntary unemployment” (MacLeod and Malcomson, 1989) remains our most highly cited work. We briefly review the development of this paper and of our subsequent related work, and conclude with reflections on the future of relational contract theory and practice.

The organizational behavior literature refers to persistent interaction patterns among members of an organization with distributed knowledge as organizational routines. To formalize this concept, as well as intuitions about organizational routines, we investigate dynamic coordination within a problem-solving team where team members cannot communicate. Each team member has a finite number of actions. There is a single action profile with a positive payoff. The task is to identify that profile through repeated trials. For each of their actions, team members have private information regarding their confidence in that action being required for a solution. In this environment, we refer to deterministic sequences of action profiles, where actions are labeled according to their confidence ranking, as organizational routines. We show that there are equilibria that give rise to organizational routines. These organizational routine equilibria partially solve the team’s coordination problem by synchronizing the team’s search efforts. These organizational routine equilibria are resilient to changes in the environment by being ex post equilibria, to agents having only a coarse understanding of other agents’ strategies by being fully cursed, and to natural forms of agents’ overconfidence. If the distribution over team members’ confidences is sufficiently dispersed, this resilience of organizational routine equilibria comes at the price of suboptimality. In contrast, generically, when this distribution is sufficiently concentrated, optimal equilibria induce organizational routines.

This paper presents a property rights model of the international organization of production, where heterogeneous headquarter firms source from suppliers in the Global South. Due to weak regulatory stringency in the Global South, suppliers can employ a cost-saving technology. Consumers, however, consider this technology as unethical and may therefore participate in a consumer boycott, if they consider a firm to be responsible for its supplier's conduct. The paper analyzes how the international organization of production and the choice of technology interact with each other as well as sectoral characteristics. It identifies three mechanisms that govern whether integration is preferred by high-productivity firms in a given sector: the Antràs mechanism (severity of underinvestment by headquarter vs. supplier), the unethical mechanism (cost savings vs. boycott risk) and the deniability mechanism (higher boycott risk under integration than under outsourcing). The equilibrium share of active firms who integrate in a sector increases with productivity dispersion and decreases in the sector's cost advantage of unethical production.

Does the matching between workers and jobs help explain productivity differentials across firms? To address this question we develop a job-worker allocation quality measure (JAQ) by combining employer-employee administrative data with machine learning techniques. The proposed measure is positively and significantly associated with labor earnings over workers' careers. At firm level, it features a robust positive correlation with firm productivity, and with managerial turnover leading to an improvement in the quality and experience of management. JAQ can be constructed for any employer-employee data including workers' occupations, and used to explore the effect of corporate restructuring on workers' allocation and careers.

Firm integration is fundamentally shaped by contractual frictions. But do better contracting institutions, reducing these frictions, induce firms to be more or less deeply integrated? To address this question, this paper exploits unique micro data on ownership shares across more than 200,000 firm pairs worldwide, including domestic and cross-border ownership links. We uncover a new stylized fact: Firms choose higher ownership shares in subsidiaries located in countries with better contracting institutions. We develop a Property-Rights Theory of the multinational firm featuring partial ownership that rationalizes this pattern and guides our econometric analysis. The estimations demonstrate that better contracting institutions favor deeper integration, in particular in relationship-specific industries.

Firms are under increasing pressure to meet stakeholders' demand for Corporate Social Responsibility (CSR) along their global value chains. We study the incentives for and investments in CSR at different stages of the production process. We analyze a model of sequential production with incomplete contracts where CSR by independent suppliers differentiates the final product in the eyes of caring consumers. The model predicts an increasing CSR profile for suppliers along the value chain: from upstream suppliers with low CSR to downstream suppliers with higher CSR. We confirm this prediction using Indian firm-level data. We compute a firm's value chain position combining product-level information in our data with the World Input-Output Database. We find that more downstream firms have higher CSR expenditures as measured by a combination of staff welfare spending and social community spending.

One of the main focus of management is on ways to motivate employees to improve their performance, initially at the level of individuals, and ultimately at the level of the organization (Denisi & Pritchard, 2006). So, it is critical to set effective performance appraisal systems to stimulate employees’ efforts. Since tournament theory arose out of the labor economics literature (Lazear & Rosen, 1981), it has expanded to a wide range of other disciplines including management. Most of the previous studies on prize structure using this theory have focused on a two-level prize while, in real life, practitioners always adopt a multiple level prize structure. In addition, previous studies on feedback in a dynamic tournament have unveiled agents’ reactions, however, there are few studies on feedback in multiple agents’ tournaments with multiple level prize structure. These two gaps between theory and practice have motivated the research in this thesis. Based on tournament theory, we study the effect of prize structure and feedback policy on employee efforts in a multi-person tournament. The experimental method is used to compare the efforts in four situations, including two-level prize structure with full feedback policy, multiple level prize structure with full feedback, two-level prize structure with no feedback, and multiple level prize structure with no feedback. After the experiment, six participants were invited to join a focus group interview for further insights on the experiment. As a supplement, a single case study of a factory in China is conducted and data collected through document analysis and a questionnaire distributed to employees. The results show that the subjects’ efforts in a multiple level prize structure is higher than that in a two-level prize structure in a multi-person tournament. Under both the policy of full feedback of own and relative performance information, and under no feedback policy, the effort in multiple level prize is also higher than that in two-level prize. These findings may contribute to develop the tournament theory in terms of prize structure in a multi-person tournament, and to bridge the gap between academia and industry since results could guide practitioners in the industry to apply a multiple level prize structure into employee performance management systems in order to maximize employee’s efforts and the overall output. A melhoria do desempenho dos trabalhadores é uma das principais preocupações da gestão quer a nível individual quer organizacional (Denisi & Pritchard, 2006), pelo que é necessário conceber sistemas de avaliação que promovam o esforço desenvolvido. A teoria dos torneios, proveniente da literatura da economia do trabalho (Lazear & Rosean, 1981), é precisamente um desses sistemas depois de se ter expandido para a gestão e para outras disciplinas. Contudo, muitos dos estudos sobre estruturas de prémios que utilizam esta teoria, têm-se concentrado em prémios com dois níveis enquanto na prática as organizações utilizam estruturas de múltiplos níveis. Além disso, embora existam trabalhos anteriores que têm revelado as reações dos agentes em torneios dinâmicos, são poucos os estudos sobre essas mesmas reações em estruturas de prémios de múltiplos níveis. Foi esta contradição entre a teoria e a prática que motivou esta tese. Com base na teoria dos torneios, a tese estuda o efeito da estrutura de prémios e da política de "feedback" seguida pela organização sobre os esforços dos trabalhadores num torneio com vários sujeitos. Utilizou-se o método experimental para se compararem os esforços em quatro situações: estrutura de prémios de dois níveis e política com e sem "feedback"; estrutura de prémios de níveis múltiplos com e sem "feedback". Finda a experiência, convidaram-se 6 participantes para um grupo de discussão a fim de se obterem mais esclarecimentos sobre a prova. Em complemento estudou-se o caso de uma empresa fabril na China através de análise documental e de um questionário distribuído aos empregados. Os resultados demonstram que, num torneio com múltiplos sujeitos, os esforços são superiores quando é utilizada uma estrutura de prémios de níveis múltiplos. O mesmo acontece em caso de política de "feedback" integral ou mesmo quando não existe "feedback". Estes resultados podem contribuir para ajudar a desenvolver a teoria dos torneios no que se refere à estrutura de prémios em torneios com múltiplos sujeitos e podem também aproximar a teoria da prática ajudando os gestores na implementação de sistemas que maximizem o desempenho dos trabalhadores.

The purpose of this study was to develop a conceptual high-performance framework that can be used to gauge how organizations operating in Africa contribute to the sustainability of the continent. This is necessary because literature review showed that the definition of high-performance is contextually located. Also, it was identified that the drive for sustainability made it mandatory for high-performance in Africa to be gauged with the triple bottom line measure. The study argued that organizations operating in the continent should partly be held responsible for social and environmental sustainability in alignment with the United Nations goals on sustainability. Based on these, it was postulated that a mind-set change was expected from business leaders to help them recognize the need for the triple bottom line measure of performance. As good corporate citizens, organizations must work to achieve long-term sustainability for the continent and for themselves. Hence, a conceptual model for defining high-performance in the African context was developed along with research proposals for testing the model in future. The study concluded that the conceptual model would ensure that organizations in Africa operate in an ethical manner so as to enhance sustainability in Africa.

Blockchain technology is firmly established in the public awareness as a revolutionary new technology underpinning cryptocurrency. However, its potential applications can be found across sectors and industries in providing a novel way of producing coordination necessary to transact online, making it a timely invention in the age of progressing digitalization and increasing demands for efficiency and security of online transactions, and a promising research topic addressing the growing academic interest in the coordination aspect of the contract scholarship. The aim of this conceptual paper is to model blockchain as a coordination mechanism for online transactions. Three key aspects of coordination with blockchains are identified and examined – (1) producing consensus about the facts relevant to a transaction, (2) coding contracts, and (3) autonomously executing transactions. They are argued to be integral parts of the mechanism, jointly enabling blockchains to function as a complete mechanism of coordination for online transactions. The model is intended to inform debates on the prospects for the blockchain technology and can be further used to integrate coordination and contract scholarship. This work is licensed under aCreative Commons Attribution-NonCommercial 4.0 International License.

This paper explores how the evolution of human sociality can help us understand how we distribute resources. Using ideas from sociobiology, I argue that resource distribution is marked by a tension between two levels of natural selection. At the group level, selfless behavior is advantageous. But at the individual level, selfish behavior is advantageous. I explore how this tension affects the distribution of resources.

Over the last decades, the internationalization of the value chain has allowed firms to exploit cross-country differences in environmental and labor regulation (and enforcement) in ways that have led to a large number of NGO campaigns and consumer boycotts criticizing ‘unethical’ practices. How do potential ‘unethical’ cost savings on the one hand and the threat to reputation and sales on the other interact with the international organization of production? In this paper we introduce North-South differences in regulation, a cost-saving ‘unethical’ technology and consumer boycotts into a standard property rights model of international production. Contracts are incomplete, so that a firm has limited control over both investments and (un)ethical technology choices of both foreign affiliates and suppliers along the value chain. We show that international outsourcing and ‘unethical’ production are linked through a novel unethical outsourcing incentive, for which we also provide empirical support: a high cost advantage of ‘unethical’ production in an industry and a low regulatory stringency in the supplier's country favor international outsourcing (as opposed to vertical FDI). We also provide a microfounded model of investment and pricing under incomplete contracts when the production technology is a credence characteristic of the final good and an NGO investigates firms and may initiate a consumer boycott.

This paper develops a simple general equilibrium model which establishes a link between the patience of economic agents and the well-being of nations. We show that firms in long-term oriented countries can mitigate hold-up inefficiencies by engaging with their suppliers in relational contracting – informal agreements sustained by the value of future relationships. Our model predicts that countries with a higher level of patience will exhibit greater economic well-being and higher total factor productivity. We provide empirical evidence in line with the predictions of our theory.

Collaboration in teams in which each member's output is critical to the overall success present organizations with difficult coordination problems. We develop a model and run simulations to analyze how costly communication affects team coordination and output efficiency. We show that absent any organizational routines to structure team communication the least efficient outcome is the most frequent organizational output. We then derive formal conditions and simulate efficiency gains for several communication routines that improve team coordination and organizational efficiency. Our model and simulation results match a broad range of findings from the experimental and organizational literature, help explain why collaborations involving several organizational units often fail, and suggest new tests for promising communication routines.

In this paper, we consider a dynamic search-and-matching problem of a firm with its intermediate input supplier. In our model, a headquarter currently matched with a supplier, has an interest to find and collaborate with a more efficient partner. However, supplier switching through search and re-matching is costly. Given this trade-off between the fixed costs and the expected gains from continued search, the process will stop whenever the headquarter has found a sufficiently efficient supplier. Using firm-product-level data of fresh Chinese exporters to the United States, we obtain empirical evidence in line with the predictions of our theory. In particular, we find that the share of short-term collaborations is higher in industries with more supplier-cost dispersion, an indication of higher expected search opportunities.

In this paper, we consider a dynamic search-and-matching problem of a firm with its intermediate input supplier. In our model, a headquarter currently matched with a supplier, has an interest to find and collaborate with a more efficient partner. However, supplier switching through search and re-matching is costly. Given this trade-off between the fixed costs and the expected gains from continued search, the process will stop whenever the headquarter has found a sufficiently efficient supplier. Using firm-product-level data of fresh Chinese exporters to the United States, we obtain empirical evidence in line with the predictions of our theory. In particular, we find that the share of short-term collaborations is higher in industries with more supplier-cost dispersion, an indication of higher expected search opportunities.

Contractual frictions are widely known to shape firm boundaries. But do better contracting institutions, which reduce these frictions, induce firms to be more or less deeply integrated? This paper provides a large-scale investigation of this question using a unique micro dataset of ownership shares across half a million firm pairs worldwide. We uncover strong evidence that better contracting institutions in subsidiaries' countries favor deeper integration, particularly in relationship-specific industries. We formally show that these findings can be explained by a generalized Property-Rights Theory of the firm featuring partial ownership, while they are at odds with the canonical Transaction-Cost Theory.

This paper introduces the concept of intangible assets in sequential supply chains and the importance of their appropriability in the organizational decision of firms. We focus on the quality of intellectual property rights (IPR) institutions, which on top of the hold-up problem between a supplier and the final producer entails an additional risk of imitation as technology may leak to competing producers in the market. The level of IPR enforcement in the location of a supplier can therefore play a crucial role in determining the decision of a final good producer whether to outsource or integrate a particular stage of production. The analysis is performed with Antràs and Chor (2013) in the background, where the position of the input along the supply chain, i.e. its upstreamness, and the degree of sequential complementarity of stage-specific inputs influence the organizational strategy of firms through the incentive structure of supplier investments. Our findings show that introducing intangible assets in sequential supply chain may have the opposite effect of contractibility on outsourcing decision, where only tangible property rights are considered. We argue therefore that the risk of imitation is a relevant feature that needs to be accounted for in the incomplete contract literature. Our theoretical predictions are validated on Slovenian firm-level data.

This work offers an overview of recent formalizations of organizational capabilities and learning. We first present the main characteristics both of NK models and of the approach based on Classifier Systems, focusing on their early applications to organization studies. We then discuss how the use of these models has contributed, in the recent years, to the formal analysis of the development and change of firm's dynamic capabilities by improving our understanding of processes of organizational learning and adaptation, and of the relationship between cognitive and governance issues.

The general aim of this paper is to come to terms with the organization and organization level research in scientometrics. Most of the debate on the issues that revolve organization level research in scientometrics is technical. As such, most contributions presume a clear understanding of what constitutes the organization in the first place. To our opinion however, such "a-priorism" is at least awkward, given that even in specialist fields there is no clear understanding of what constitutes the organization. The main argument of this paper holds that performing organization level research in scientometrics can only proceed by taking a pragmatic stance on the constitution of the organization. As such, we argue that performing organization level research in scientometrics (i) requires both authoritative "objective" and non-authoritative "subjective" background knowledge, (ii) involves non-logic practices that can be more or less theoretically informed, and (iii) depends crucially upon the general aim of the research endeavor in which the organization is taken as a basic unit of analysis. To our opinion a pragmatic stance on organization level research in scientometrics is a viable alternative to both overly positivist and overly relativist approaches as well as that it might render the relation between scientometrics and science policy more productive.

This paper examines how IT influences global sourcing decisions. It develops a theoretical model to study how IT determines the decisions of firms located in the high-wage North whether to offshore production to a low-wage country in the South. Offshoring to South however is subject to costly communication reflected by partially incomplete contracting. More sophisticated IT allows more efficient communication between the Northern headquarter and its Southern intermediate input supplier and alleviates contractual frictions. The model provides several predictions about the impact of IT on the organization of the global supply chain. Complex industries for which codifiability and verifiability of information is a much harder task, are more likely to source intermediate inputs in countries with more efficient IT infrastructure. Considering the mode of firm organization, more efficient IT infrastructure is expected to reduce the share of intra-firm trade in more complex industries. These predictions are examined and validated using disaggregated industry-level trade data. Most importantly, these findings are robust to controlling for well-known sources of comparative advantage and determinants of firm organization such as factor endowments, financial development and contract enforcement.

This study investigates induced productivity effects of firms introducing new environmental technologies. The literature on within-firm organisational change and productivity suggests that firms can achieve higher productivity gains from adopting new technologies if they adapt their organisational structures. Such complementarity effects may be of particular importance for the adoption of greenhouse gas (GHG) abatement technologies. The adoption of these technologies is often induced by public authorities to limit the social costs of climate change, whereas the private returns are much less obvious. This study finds empirical support for complementarity between green technology adoption (either CO2-reducing or resources and energy efficiency-enhancing technologies) and organisational change. While the sole adoption of green technologies is associated with lower productivity, the simultaneous implementation of green technologies and organisational innovations is not.

Early studies often found that offering economic incentives for undertaking prosocial and intrinsically motivated activities can crowd out motivation to perform these activities. More recent work highlights nuanced and important features related to whether crowding out (or substitution) is likely to occur. In many cases, incentives succeed in encouraging more prosocial behavior and are also cost-effective. However, although the substitution of external incentives for intrinsic motivation may not be a concern in many contexts, the substitution of one prosocial activity for another or shifts in activities over time or location may warrant further attention.

Headquarters and their specialized component suppliers have a vital interest in establishing long-term collaborations. When formal contracts are not enforceable, such efficiency enhancing cooperation’s can be established via informal agreements, but relational contracts have been largely ignored in the literature on the international organization of value chains. In this paper, we develop a dynamic property rights model of global sourcing. A domestic headquarter collaborates with a foreign input supplier and makes two decisions in every period: i) whether to engage in a costly search for a better partner, and ii) whether to make a non-binding offer to overcome hold-up problems. Our key result is that the possibility to switch partners crucially affects the contractual nature of buyer-supplier relationships. In particular, some patient firms do not immediately establish a relational contract, but only when they decide to stop searching and thus launch a long-term collaboration with their supplier. From our model, we develop an instrumental variable estimation strategy that we apply using transaction-level data of fresh Chinese exporters to the US. We obtain empirical evidence in line with the theoretical prediction of a positive causal effect of match durations on relational contracting.

We examine an infi nitely repeated game between a principal, who has the formal authority to decide on a project, and a biased agent, who is privately informed about what projects are available. The optimal relational contract speaks to how power is earned, lost, and retained. It shows that entrenched power structures are consistent with optimal administration of power. And it provides new perspectives on why similar firms organize differently, even when those organizational differences lead to persistent differences in performance, and why established firms fail to exploit new opportunities, even when they are publicly observable.

This paper analyzes delegation and joint decision making in an environment with private information and partially aligned preferences. We compare the benefits of these two decision making procedures as well as the interaction between them. We give a condition under which delegation is preferred to ex post joint decision making and we show how the interaction between delegation and ex post joint decision making always crowds out delegation. Finally, we analyze how the availability of the principal at the communication stage affects our results.