Solving Contracting Problems: How an MNC Adapted Contracting Knowledge to Local Requirements

Abstract

Drawing on the problem-solving perspective of the knowledge-based view (KBV), we propose and assess how a business resolved the problem of how best to contract with suppliers as a business of a multinational corporation (MNC) entering a new country with a legal system different from their own. We posit such a business will search for knowledge from outside the firm codified in the standard industry templates for both legal systems and combine it with firm knowledge accumulated by the MNC in prior contracting. We then analyze the contracting templates developed by a business of a French MNC hired by the United Kingdom government to build a major project in the UK. We find the resulting customized portfolio of contracting templates reflect the negotiated shared beliefs of the authority-based hierarchy, defining the area of the solution landscape where directional search will take place during supplier negotiations. We discover they resolved their contracting problem by addressing six sub-problems associated with distinctive knowledge sets and designing six customized templates. Our comparison of the two standard industry templates and six customized templates suggest the business integrated contracting knowledge taken from two legal systems and the MNC in their portfolio of customized templates.