Informal Contracts Research Articles

Anti-shopping tourism: a new concept in the field of consumption

In this article, based on qualitative research in Hungary, we propose a new phrase for the field of tourist consumption. Our notion ‘anti-shopping tourism’ refers to the resistant attitude towards consumption and spending money during shopping-related tours. The research discussed in the paper analyses participants’ motivations, attitudes and behaviour on one-day coach trips that include various programmes, for example, sightseeing, lunch, spa visits and even a range of gifts, for a very low price, in exchange for participation in a professional sales show during the trip. Our main goal is to explain and, from an economic and anthropological point of view, conceptualise this form of tourist attitude, and to show how this unique way of travel may be situated in a certain historical setting in Hungary, more than two decades after the collapse of the socialist regime. In order to understand how the participating individuals negotiated this unique form of travel that exists in a grey zone of the institutionalised travel industry, notions such as debt, sacrifice, resistance, gift, seduction and informal contract are discussed and connected to the phenomenon.

On the Determinants and Consequences of Informal Contracting

As documented by Macauley (1963) and others, informal contracts are pervasive in modern economies. Yet, systematic empirical evidence on them is still limited. In this paper, we provide a framework to investigate the determinants and consequences of informal contracts. First, we present a model that organizes key predictions from the theoretical literature. Next, we discuss selected empirical works that shed light on the model’s empirical relevance. Finally, we discuss strategies for testing theoretical predictions for which conclusive evidence is still missing, as well as unexplored research opportunities offered by available studies and data.

Investing in a relationship

A principal can make an investment anticipating a repeated relationship with an agent, but the agent may appropriate the returns through ex post bargaining. I study how this holdup problem and efficiency depend on the contracting environment. When investment returns are observable, informal contracts ex post can be more efficient than formal contracts, as they induce higher investment ex ante: the principal invests not only to generate direct returns, but also to improve relational incentives. Unobservability of returns increases the principal's ability to appropriate the returns but reduces her ability to improve incentives. The optimal information structure depends on bargaining power.

Organizing insecurity: marginal subjects and narratives of injustice

In order to understand how insecurity is organized, we draw from our conversations with marginal workers from a variety of contexts in India – Tamil and Tibetan refugees, informal sector workers, contract or temporary workers and organized sector workers with apparently stable contracts. We theorize insecurity as the experience of injustice, and the structuring of inequalities to which workers are forced to give muted consent. We also read insecurity as the production of sovereignties in which the nation, state and the corporation intersect to produce regimes of injustice. Finally, we read insecurity as the abduction of the subject of the worker, and her conversion into a resource from whom value is extracted. Perhaps, the hope of resistance lies in the politics of vulnerability, a politics which undoes the subordinations and the violence of contracts.

Analysis of Gender and Governance of Value Chain-Based Systems on Rice and Vegetable Crops in Southern Benin and Mali

This present study analyses gender and governance in the rice and vegetable-based value chain systems in 3 lowlands of southern Benin and 2 lowlands in Southern Mali. A sample of 243 farmers, 1 modern processing unit, 18 traditional processors, 76 traders and 8 national institutions were interviewed in Benin and Mali. Descriptive statistics and Harvard analytical framework were used for the analysis of governance and gender respectively in the value chains. The majority of farmers have access to the use of land. Women produce up to 80% of basic foods for household consumption and sale. However they don’t have the control of these resources (capital and land). Decision making in relation to resources (land, water labor, credit) is under the control of men and natives. The governance analysis showed that the products of lowlands are not subject to quality control, with no public inspection for health and product quality. There is no input subsidy for actors in both countries. There are informal contracts between actors of the rice based systems in Mali and Benin. The markets are open for all the products and credit systems do exist. Some structures are involved in upstream and downstream chain components for training in various activities.

Doctors’ functional leadership in psychiatric healthcare teams – a reversible leadership logic

Purpose– The purpose of this paper was to study how psychiatric doctors practise leadership in multidisciplinary healthcare teams. The paper seeks to answer the question: How do psychiatric doctors lead multidisciplinary teams during treatment conferences?Design/methodology/approach– Six psychiatric teams were studied at a university hospital. Each team was observed over a period of 18 months, and data were collected during four years (2008-2011). Data were collected through interviews with doctors (n= 19) and observations (n= 30) of doctors’ work in multidisciplinary psychiatric teams.Findings– Doctors in a multidisciplinary team use either self-imposed or involuntary leadership style. Oscillating between these two extremes was a strategy for handling the internal tensions of the team.Research limitations/implications– The study was a case study, performed during treatment conferences at psychiatric wards in a university hospital. This limitation means that there is cause for some caution in generalising the results.Practical implications– The results are useful for understanding leadership in multidisciplinary medical teams. By understanding the reversible logic of leadership, cooperation and knowledge sharing can be gained, which means that a situation of mere peaceful coexistence can be avoided. Understanding the importance of the informal contract makes it possible to switch leadership among team members. A reversible leadership with an informal contract makes the team less vulnerable. The team’s professionals can thus easily handle difficult situations and internal tensions, facilitating leadership and management of multidisciplinary teams.Originality/value– Doctors in multidisciplinary psychiatric teams use reversible leadership logic.

The interplay between formal and informal contracting in integrated project delivery

This research examines the interplay between formal and informal contracting in integrated project delivery (IPD). It investigates how the interplay enables parties in health-care construction projects to cope with uncertainty and complexities, due to, among others, changing demands. New delivery models based on collaborative interaction, such as IPD models, often rely on relational contracting principles, defined as the simultaneous use of formal contracts and informal relational mechanisms to govern relationships between partners. Five case studies of IPD health-care construction projects in the USA and Norway are presented and analysed. The results show that the projects rely heavily on the formal contracts and structures to stimulate collaboration between the project team members and to enhance problem-solving. However, informal mechanisms play just as an important role. While formal mechanisms facilitate the building of trust and personal relationships between the partners, the formal mechanisms are in turn created and recreated through informal practices, illustrating a mutual constitutive relationship between the two types of mechanisms. The findings also indicate that previous experiences reinforce informal mechanisms in the project. The paper concludes that IPD models involve a complex interplay between formal and informal mechanisms, which engenders commitment resulting in joint problem-solving and responsibility throughout the construction process. The findings also indicate that even if the dynamic context and future uncertainties in health care are taken into account, dealing with such flexibility issues is not at the core of the current IPD model.

The challenge of using standard contracts in public–private partnerships

A call for an increased use of standard contracts in public–private partnerships (PPPs) for infrastructure development is noticeable in practice. These contracts are expected to simplify and improve procurement by creating opportunities for learning, lower transaction costs, and better competition. This paper delineates standard contracts in PPP as a new venue for research and unfolds their potential impact. Here lies an important challenge since the benefits of standardization are not as straightforward as they look at first sight, particularly when taking into account the tension between the powerful, control-oriented role of contracting authorities and the need for contingent, informal contracting.

Social Networks as Contract Enforcement: Evidence from a Lab Experiment in the Field

Lack of well-functioning formal institutions leads to reliance on social networks to enforce informal contracts. Social proximity and network centrality may affect cooperation. To assess the extent to which networks substitute for enforcement, we conducted high-stakes games across 34 Indian villages. We randomized subjects’ partners and whether contracts were enforced to estimate how partners’ relative network position differentially matters across contracting environments. While socially close pairs cooperate even without enforcement, distant pairs do not. Individuals with more central partners behave more cooperatively without enforcement. Capacity for cooperation in the absence of contract enforcement therefore depends on the subjects’ network position. (JEL C93, D86, K12, O15, O17, Z13)

The employment relationship in an (almost) structureless labour market: the case of domestic work

Although domestic workers are generally engaged in informal contracts with hourly and daily wages, some have formally written contracts and are paid monthly. Hourly and daily wages suggest flexible arrangements, whereas the monthly payment system may be used to develop a stable relationship. Using original data from a sample of domestic workers in Portugal, we offer empirical evidence on predictors of four types of arrangement that combine formality and stability. The results from multinomial logistic regression indicate that the wage level is a crucial predictor of the type of contract. Households seem to make a trade-off between stable contracts and high-level wages. However, the odds of being given a formal and stable contract increase when domestic workers have specific skills or are responsible for care, and there are trust-related issues. Our findings suggest that the use of flexible and informal labour has its limitations even in an activity perceived as non-skilled.

The influence of the psychological contract on the performance of inter-organizational networks: perspetive from behaviors of organizational citizenship

The objetive of this article is to show, conceptually, the relevance of the psychological contract in the performance of the functioning of inter-organizational networks, through its influence on the emergence of behaviours of organizational citizenship. The work contract can be perceived in two ways: the formal contract, described in the form of a written work contract, and the other, the informal and implicit psychological contract. A more favourable psychological contract is related to high levels of commitment and performance, making collaborators show a set of actions that are not directly related to their main functions, but which are important in modelling the organizational, social and psychological context that serves as a catalyst for task activities and processes. Various studies have revealed that organizations where behaviours of organizational citizenship are more marked show better indicators of effectiveness. It seems obvious to assume that organizational citizenship behaviours influence positively the performance of inter- organizational networks. But will it in fact be possible to establish some relationship between the results of inter-organizational networks and organizational citizenship behaviours, associated with organizational effectiveness? We explore the conceptual relationship between the dimensions of organizational citizenship – inter-personal harmony, spirit of initiative, conscientiousness and identification with the organization – and the results associated with the functioning of inter-organizational networks – strategic and economic benefits, learning and knowledge, innovation and transformations in the environment. After presentation of a conceptual model of analysis, we also present propositions to be explored in future investigations within this area of knowledge.

School Finance and Learning: Are We Leveraging State Aid to Get All We Can Out of It?

After spending some twenty-five years working on schoolfinancefortheNewYorkStateEducationDepartment,Ihadtheopportunitytoworkoneducationreform for the State of Nevada. As Deputy Superintendent for Business and Support Services, I oversaw state aid to school districts, information technology, audit services, and child nutrition. I also served as Education Department liaison to the 77th session of the Nevada Legislature. Although my sojourn in Nevada, lasting little more than a year, was brief compared with my work in New York, the experience gave me perspective on how two states were implementing school finance and reform. Recent reforms in both states were driven in large part by the federal Race to the Top competition, but the approaches to reform were quite different. Key features of the education environment in Nevada—basic student services and a strong inclination against raising taxes—worked to keep school spending low, the sixth lowestschoolspendinginthenationat$8,419perpupil. New York State, in contrast, is a large-enrollment, highspending, and high-taxing state. Consequently, spending per pupil on education is among the highest in the nation, at $16,239 per pupil. 1 In 2011, the state reached the breaking point, however, and enacted laws to limit growth into the future for education revenues raised from the property tax and distributed as state aid to school districts.

Plural forms of governance in the beef industry: a case study in Brazil

Purpose – The purpose of this paper is to describe the forms of coordinating transactions used by a large beef slaughterhouse and processing companies and their suppliers of beef cattle, and to identify the reasons for the adoption of plural forms of governance for their transactions with cattle suppliers. Design/methodology/approach – A case study format was selected for this investigation. The focal company selected offers a large number of products derived from beef for different commercialisation channels in the domestic and foreign market. A non-probability sample of 30 suppliers (cattle farmers) of the focal company provided data on finished steers sold in 2010, according to the three types of governance used in the transactions (spot market, forward contracts and long-term contracts). Findings – The simultaneous use of more than one type of governance structure to coordinate similar transactions has been termed plural forms of governance in the literature. In Brazil, new forms of governance, such as formal and informal contracts, have been adopted for transactions between beef processing companies and cattle farmers, in addition to the use of spot market and vertical integration. It has been shown that the adoption of plural forms reduces the risk of complex transactions; and is a strategy to deal with unpredictable institutional environments and high heterogeneity of both suppliers and distribution channels. Research limitations/implications – The research provides empirical evidence of plural forms of governance, as well as the reasons for the adoption of this strategy by firms, which contributes to the ongoing theoretical discussion on this subject. Practical implications – The paper has implications for company supply chain management. Originality/value – This paper presents theoretical review on plural forms of governance, new empirical evidence and determinant factors for their adoption.

Informal Employment Contracts and the Battle over Retirement Benefits

Weak economic growth and the resultant financial pressures have made post-retirement benefits a tempting target for cutbacks, in both the private and public sectors. Unlike pensions themselves, ancillary retirement benefits such as supplementary medical coverage are often vaguely defined. If they are part of the contract of employment, an attempt by the employer to reduce them represents a breach of contract. The employment contract is often quite informal, and there is room for debate about which promises were contractual. In two recent decisions in BC and Ontario, retirees were able to convince the court that the benefits were contractual. Each case hinges on its own facts and the evidence on past communications, and how they fit with the contractual principles of offer, acceptance and consideration. Part of the problem is that the details of these benefits are often presented to the employees only after they have accepted the position. This allows the employer to argue that they are non-binding, gratuitous promises. Under the unilateral contract principle, the employee can accept by performance. However, there is a question of whether any consideration is provided by the employees to make the contract binding. In this case, it can be argued that the economic hypothesis of the efficiency wage is relevant. This hypothesis posits that better remuneration positively influences employee loyalty and productivity, providing consideration in exchange for the employer's offer of the enhanced benefit.

Broken Contracts and Hidden Partnerships: Theory and Experiment

Previous research indicates that unenforceable informal contracts (or commitments) promote trust and reciprocity. Nonetheless, while such contracts may benefit existing exchange, in dynamic environments they may also hinder one’s willingness to explore newly emerging Pareto efficient opportunities. This issue arises in both business and social contexts, and includes industry non-compete agreements as well as personal relationship commitment decisions. We report data from an experiment using a novel three-person trust game where, in different treatments, different players are able to communicate with each other. We find that when, between the point of commitment and the point of decision, no new information is received regarding the expected value of commitment, then people overwhelmingly decide in accord with their informal contracts and avoid exploring potentially Pareto improving opportunities. However, when new information arises that reduces the relative value of commitment, and when this occurs following the commitment but before the decision, then people are significantly more likely to deviate from their informal contract and pursue a Pareto improvement. Further, we observe a “contingency effect” where the likelihood with which people follow an informal commitment declines with the number of contingencies that must occur in order for the contract to be realized. Finally, none of the theories of lying aversion that we explore are able fully to explain our data.

Ethnic Divisions, Contract Choice and Search Costs in the Guatemalan Land Rental Market

This paper shows how ethnic diversity in a context of weak property rights enforcement can result in market segmentation. In particular, the paper analyzes how contract enforcement problems in a period of high ethnic tensions affect the joint decision of partner and contract choice by landlords in the land rental market in Guatemala. The results show that landowners without formal title are more likely to restrict their partners for a rental contract to tenants from the same ethnic group. However, partner choice is found to be less important for renting with interlinked land-labor contracts. The results also provide evidence of the importance of search costs, as the relative scarcity of tenant types is found to have an effect on partner choice. These findings suggest that informal contract enforcement within ethnic circles of confidence might lead to a suboptimal land allocation and contract choice. To the extent that this limits access to land for the indigenous poor, this could further exacerbate the ethnic tensions and lead to a vicious cycle.

Design of contracts between knowledge-intensive service firms in comparative property right settings

Purpose – This article aims to explore how knowledge-intensive service firms design inter-firm contracts to govern the exchange of highly intangible and inseparable knowledge under varying degrees of property right protection. Design/methodology/approach – This research uses a multiple case study of management consulting firms domiciled in Serbia and Albania. Findings – Firms domiciled in relatively weak property right settings prefer more informal contracts, whereas those in settings of superior property right protection favour greater formality as a means of encouraging the creation and sharing of knowledge, whilst concurrently mitigating the threat of opportunism. Research limitations/implications – This article contributes new knowledge with regard to the design of inter-firm contracts to govern the sharing of highly intangible and inseparable knowledge. In terms of theory, it employs a transaction cost economics approach in which inter-firm contracts are decomposed into five requisite provisions, which are then related to the degree of formality. Practical implications – Knowledge-intensive service firm managers should assess the degree of property right protection when considering the degree of formality of inter-firm contracts. Originality/value – The study constitutes the first attempt to empirically examine how knowledge-intensive service firms craft contracts in different property right settings. With the burgeoning number of cross-border collaborative partnerships between such firms, it offers important insights into the choice of governance mechanism in different property right protection settings.

Promises and Lies: Can Observers Detect Deception

Although economic and social relationships can involve deception (Gneezy 2005), such relationships are often governed by informal contracts that require trust (Berg et al.1995). While important advances have been made concerning deception in economics, the research has focused little on written forms of communication. Are there certain systematic cues that signal written communications as dishonest? Are those signals accurately detected and used by message receivers? We fill this gap by studying messages written in a novel three-person trust game; (we call it the “Mistress Game”). We find that: (1) messages that use encompassing terms, or a greater number of words, are significantly more likely to be viewed as promises; and (2) promises that mention money are significantly more likely to be trusted. Notwithstanding the latter finding, we find senders who mention money within their promises to be significantly less likely to keep their word than those who do not; observers respond to cues but in the wrong way.

Does Nature of Training, Informal Activities and Psychological Contract Impact Fairness Perception? Examining Diverse Group Employees

Perception of organizational fairness is an important indicator of effectiveness of diversity climate of any organization. In the present study, a sincere attempt has been made to examine the perception of organizational fairness among diverse group employees. The study was conducted upon 207 lower and middle managerial level employees of two reputed public sector units situated at Orissa, India. The total sample was spread over five different social groups, namely—Oriya Hindu male, Oriya Hindu female, Oriya reserved category, non-Oriya Hindu male and Oriya non-Hindu male. First, we tried to examine the difference, if any, among the employees belonging to these different groups upon their perception of fairness in the organization. Also, multiple stepwise regression analyses were carried out to explicate the contributions from different dimensions of nature of training, informal activities and psychological contract towards perception of organizational fairness. The results indicate that, Oriya reserved category and Oriya Hindu female employees differ significantly from Oriya Hindu male employees and other groups upon perception of fairness. Regression analyses reveal that perceived relevance of interpersonal training and accommodativity of technical training are stronger predictors of perceived fairness in case of all the groups, whereas level of participation in informal activities and psychological contract on power emerge strong contributors towards fairness perception of reserved category as well as Oriya Hindu female employees. The findings have been discussed in light with relevant literature along with future implications.

Gender Differences in the Structure of Customer Relationships: Evidence from Nigerian New Ventures

Informal contracts with customers are an essential but often overlooked aspect of entrepreneurship research. Taking a gender perspective, we investigate the influence of women-managed ventures on the structure of customer relationships. We theorize that due to constraints on their financial networks, women-managed ventures may be impelled to use informal network structures to a great extent than their male-managed counterparts. Specifically, we propose that the proportion of women managers in a new venture is positively associated with the extent of informal customer purchase orders and the extent of customer funded trade credits. We also explore the moderating influence of information technology (IT) and primary customer geographical location on these relationships. Findings from an analysis of 441 Nigerian new ventures drawn from the World Bank Investment Climate Survey provide support for our theory. These results help highlight how women-managed new ventures in emerging markets use informal relationships with customers to mitigate market failures.