۱- Introduction

۲- Theoretical background and hypotheses

۳- Partnering experience and contractual complexity

۴- Methods

۵- Measures

۶- Results

۷- Discussion

۸- Conclusions

References

Abstract

This research investigates the learning of inter-organizational contract design in greater depth. Two types of learning, i.e. learning from all past partnerships and learning from one specific partner, are distinguished in terms of their influence on the complexity of three different functions of the contract, namely control, coordination, and adaptation. Contract design capability and interorganizational routines are employed as mediators to explain the two types of learning respectively. Empirical tests using data from the Chinese construction industry reveal that there are significant indirect effects between partner-specific experience and contractual coordination, and between general partnership experience and all the three functions of the contract. This research contributes to the literature by providing more nuanced conclusions regarding the contract learning issue.

Introduction

It has long been acknowledged that firms can develop various capabilities through experience for superior performance (Kale & Singh, 2007; Levitt & March, 1988; Sampson, 2005; Zollo, Reuer, & Singh, 2002). Whilst the strategic management and organizational literature mainly focus on how firms accumulate and leverage know-how and enhance alliance capability to achieve success, less research has examined learning related to contract design in interorganizational relationships compared with the extensive literature on organizational learning regarding technical knowledge and skills (Lumineau, Fréchet, & Puthod, 2011). The contract serves as a formal governance mechanism and plays an important role in controlling deviant behavior, mitigating potential transaction hazards, and ensuring the realization of organizational performance (Lu, Zhang, & Zhang, 2016; Luo, 2002; Mellewigt, Madhok, & Weibel, 2007; Poppo & Zenger, 2002; Wang, Chen, Wang, & Tang, 2016). Considering that firms tend to absorb prior partnering experience to facilitate contract design (Argyres & Mayer, 2007), this research aims to investigate such processes in more depth from an organizational learning perspective. The extant literature on contract design learning has investigated the impact of firm’s prior partnering experience on contractual complexity, but the scholars seem to have suggested more than straightforward conclusions. Specifically, some studies take the view that prior partnering experience will lower the costs of contracting through learning, leading parties to draft more complex subsequent contracts (Mayer & Argyres, 2004; Mellewigt, Decker, & Eckhard, 2012; Ryall & Sampson, 2009; Xing, Mayer, & Xie, 2015), while some others focus on the reduction of behavior uncertainty and the development of trust through repeated collaboration, drawing a conclusion that subsequent contracts tend to be less complex (Ariño & Reuer, 2005; Reuer & Arino, 2007).