An organizational learning perspective on the contracting process

Abstract

The contracting process is a crucial step in alliance development and its success. However, the existing literature reveals surprisingly little investigation into how organizational learning relates to the process of contract making. The authors therefore conducted an in-depth longitudinal study of the alliance contracting process in the animated film industry. First, the study’s findings suggest that during the contracting process, firms can learn about the way to deal with the contracting process, about themselves and their partner, and about the transaction features. Second, the case analysis indicates a combination of experiential, vicarious and inferential learning mechanisms. Combining these insights into the objects and the mechanisms of learning during the contracting process, the authors discuss how contracting and learning processes are related and analyse the role of the contracting process in supporting organizational learning. The findings show that the drafting of contractual clauses fosters learning and, in turn, this learning triggers new contractual negotiations. Hence the authors suggest that the alignment between transaction features and the choice of contractual governance results from learning during the contracting process. They then propose avenues for future research.