D. Smith and Brayden King,
Contracts as Organizations,
Available at: https://digitalcommons.law.byu.edu/faculty_scholarship/346
Empirical studies of contracts have become more common over the past decade, but the range of questions addressed by these studies is narrow, inspired primarily by economic theories that focus on the role of contracts in mitigating ex post opportunism. We contend that these economic theories do not adequately explain many commonly observed features of contracts, and we offer four organizational theories to supplement – and in some instances, perhaps, challenge – the dominant economic accounts. The purpose of this Article is threefold: first, to describe how theoretical perspectives on contracting have motivated empirical work on contracts; second, to highlight the dominant role of economic theories in framing empirical work on contracts; and third, to enrich the empirical study of contracts through application of four organizational theories: resource theory, learning theory, identity theory, and institutional theory. Outside the economics literature, empirical studies of contracts are rare. Even management scholars and sociologists, who generated the four organizational theories just mentioned, largely ignore contracts, both in theoretical and empirical analysis. Nevertheless, we assert that these organizational theories provide new lenses through which to view contracts. While economic theories of contracting focus primarily on one purpose of contracts – mitigating ex post opportunism – the four organizational theories help us understand the multiple purposes of contracts.