Contracting, co-operative relations and extended enterprises

Abstract

This paper assesses current issues of economics and law, to propose that economic understanding, law reform and public policy should recognise and encourage hybrid types of collaboration, whilst simultaneously recognising that pitfalls also exist. It is acknowledged that innovation is fundamental to economic success with public and private institutions sharing knowledge risk and rewards. These exchanges occur within and between discrete economic units that pool their specialisation and experience, whilst examining an optimum boundary for the firm. This develops new forms of consortia, ranging from product life-cycle corporations to virtual enterprises. These form networks of independent companies that do not conform to acknowledged legal classifications of corporations or contractual relations, such as traditional main and subcontractor agreements or joint ventures. Established schools have analysed complex adaptive systems, in terms of independent enterprises that operate as a unified team and other forms of strategic alliance, to develop and manufacture a common product. However, mainstream economics and law generally fall short of directly addressing the fact that these alliances exist and are evidence of a trend. It is recognised that the process of innovation, which can extend from research to delivery to the ultimate customer, is not a linear process but an iterative progression, where inventive enterprises exchange knowledge. This process operates within a network, whose members represent wider interests than simply those of the private sector. Within this plurality of interest, each member remains responsible for quality in its particular area. This evolution in the structure of economic relations results in co-operative alliances that are informally grouped clusters. These structures may be referred to as a nexus of treaties wherein barriers of accountability are blurred by the gradual process of incorporation.