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Collaboration, Innovation, And Contract Design, Matthew C. Jennejohn

Matthew C Jennejohn

The rise of the network as a form of economic organization renders problematic our standard understanding of how capitalism is governed. As the governance of production shifts from vertical integration to horizontal contract, a puzzle arises: how do contracts, presumed to be susceptible to hold-up problems due to incompleteness, control production arrangements that by their nature invite opportunism? Relying on publicly-available contracts taken from a number of industries, I argue that firms govern their collaborations through a number of new contract mechanisms, the summation of which is a novel governance system. Because traditional theories of contractual control struggle to fully …