Long-term Contractual Relationships Research Articles

Multi-period quality and pricing decision in production-focused and market-focused supply chains: How to manage a long-term contractual relationship

This study investigates the effect of the long-term contract on multi-period decisions regarding product quality and sales price in a production-focused supply chain (PSC) and a market-focused supply chain (MSC). By introducing cumulative quality investment over time as in practice and comparing long-term supply chain performance, we reveal that the relationship between supply chain players is the key factor impacting long-term performance. To enhance the supply chain’s long-term profit performance, we find the contract condition should be more advantageous to the supplier responsible for product quality than to the buyer deciding on the sales price, regardless of supply chain types and environmental changes. We also reveal that the MSC can outperform the PSC in the long run. However, it should be noted that the contract condition needs to be more advantageous to the supplier in the MSC than in the PSC. We provide new and significant guidelines for practicing managers by revealing that long-term decisions should differ from single-period decisions.

평등의 원칙과 사법 (私法)

The principle of equality has traditionally been a topic in public law scholarship. In recent years, however, it is increasingly discussed in private law scholarship. This paper discusses how the principle of equality operates in private law. The conclusions are as follows: First, private law legislation as well as private law interpretation have been undoubtedly bound by the principle of equality. However, private law relationships between private persons are not. In this area, the so-called horizontal effect of principle of equality or rights thereto shall be denied. Second, there are examples in private law where the principle of equality appears to be applied. Resolutions, decisions, or di spositions by or in corporations, associations or long-term contractual relationship can be illegal if they are discriminatory; refusal to deal, suspension of dealings, or refusal of admission to an organization or long-term contractual relationship can be illegal if they are discriminatory; the exercise of ownership rights or the operation of an organization can be i llegal if it has been open to the publi c while excluding certain persons or groups of persons in contradiction to that practice. These are manifestations of the inherent limits of private autonomy, of the principle of good faith and fair dealing, of abuses of rights, and of the general right to personality, however, rather than of the principle of equality, especi ally constitutional equality. Finally, legislators can still impose obligations on private persons to treat other private persons equally, and many do. Given the inherent tension between private autonomy and equality, however, such legislation should be limited to specified traits and/or specified areas and should not be too broad. Relevant legislations in the United States and Germany demonstrate it. It is questionable whether the drafts for the general equal
 treatment act currently being discussed strikes such a balance.

Is tenure important in the sustainability assurance context? An empirical analysis of the informative value of assurance statements

PurposeThis paper aims to examine the communicative value of assurance reports by investigating whether the impact on information asymmetries is contingent on the length of the contractual relationship between clients and assurance providers, which can compromise the provider’s independence.Design/methodology/approachUsing a firm-level data set of publicly listed international firms from 2007 to 2016, the authors estimate several regression models for panel data by using the generalized method of moments estimator to address the endogeneity issue.FindingsResults find that the greater the communicative value in assurance statements, the lower the information asymmetries. However, this effect is constrained when the assurance provider’s independence is compromised due to an excessively long-term contractual relationship. In other words, assurance statements with more informative value enhance the firm’s transparency and increase users’ confidence in the sustainability information provided. However, the loss of independence linked to longer tenure jeopardizes the communicative value of the assurance report and contributes to reducing information asymmetries.Originality/valueThe study makes at least three clear contributions to current literature. First, the authors contribute to the limited existing research about the communicative value attributed to assurance statements by stakeholders. Second, the authors indirectly contribute to the literature that analyses whether stakeholders understand the assurance report, a complex statement in a growing market. Addressing the communicative value of assurance is certainly a difficult task, as it is a novel and complex activity. Third, the main contribution is providing initial empirical evidence about the moderating effect that assurance provider tenure has in the relationship between the informational content of the assurance report and the level of information asymmetries. To date, there is no empirical evidence regarding the moderating effect of long assuror’s tenure as an important feature of the assurance market, and beyond that, regarding its impact on the communicative value assigned by stakeholders to assurance statements.

Research contract relationship between a large industry partner and South African universities

We propose and evaluate a contractual structuring instrument (in the form of a Framework Research Agreement) in support of research collaboration partnerships between universities and large industry, specifically for the case of large industry in the South African context. This study includes one large South African originated industry (as the pioneer of concluding Framework Research Agreements with several universities) and multiple South African universities, and stretches over several decades. This study was done within the broader context of the challenges and benefits experienced by both industry and university in the academic engagement sphere of industry–university collaboration. By providing insight from both industry and university perspectives, factors impacting on academic engagement (with specific emphasis on the legislative framework, contractual aspects, institutional research contract practices and institutional risks), are considered and discussed. Recommendations are made for improved industry–university collaboration by sharing experiences from the industry and universities on challenges faced, managing the expectations and proposing mechanisms to support constructive research collaboration through a mutually beneficial contractual framework instrument. Significance: A novel Framework Research Agreement as a contractual instrument was developed and pioneered by the industry partner with several South African universities, to create a transparent framework based on fair contracting and determinable remuneration principles. This study specifically highlights the need for a contractual instrument, in which the intention is to build a long-term contractual relationship to support industry–university collaboration and academic engagement within the existing South African legislative framework. It further draws attention to research contract management practices and contractual aspects, which until now have been largely ignored in industry–university collaboration and academic engagement frameworks of this kind.

Theoretical Foundations of Relational Incentive Contracts

This article describes the emerging game-theoretic framework for modeling long-term contractual relationships with moral hazard. The framework combines self-enforcement and external enforcement, accommodating alternative assumptions regarding how actively the parties initially set and renegotiate the terms of their contract. A progression of theoretical components is reviewed, building from the recursive formulation of equilibrium continuation values in repeated games. A principal-agent setting serves as a running example.

An analysis of the farmers contractual preferences in process innovation implementation

Purpose The purpose of this paper is to consider how farmers cope with the uncertainty-related broiler process innovation in long-term contractual relationships. Design/methodology/approach This paper conceptualizes the process innovation implementation in terms of governance structure adaptation. The focus of the study is on the property and decision rights combination in process innovation implementation. It is argued that this approach highlights a key aspect of the nexus between governance mode and innovation within inter-firms relationships. Findings The results first show that the allocation of the decision rights between the farmer and the processor explains the process innovation implementation and, second, that the farmer contractual preferences are caused by the expected costs of the adaptation. Third, estimates of transaction and production costs variations are proposed. Research limitations/implications This study considers only the uncertainty stemming from the process innovation, whereas further uncertainty sources may influence the contract negotiation. Second, the lack of sample representativeness requires further information to be gathered. Finally, the investigation could be developed by modeling the farmer-processor negotiation. Practical implications The results indicate that effective governance structures in poultry production should give room to the adaptation in order to facilitate process innovation. Originality/value To conceptualize the process innovation implementation as an adaptation of the governance structure strengthens the knowledge of innovation in the sector context and contributes to the extent of the applied field of transaction cost economics.

חוזה ויחסים – המקרה של שינוי חוזה בהתנהגות <br>Modifying a contract by behavior

חוזה ויחסים – המקרה של שינוי חוזה בהתנהגות <br>Modifying a contract by behavior

A SYSTEM-OF-SYSTEMS FRAMEWORK FOR PUBLIC-PRIVATE PARTNERSHIP PROJECTS

Public-private partnership projects are a complex form of megaprojects since they include a close-knit long-term contractual relationship between a public and private entity. Studying a PPP project as a monolithic system often leads to disregarding the emergent properties that occur from the interdependency between the subsystems. Hence there is a need for providing a framework for analyzing PPPs using the systems engineering approach. This paper proposes the adoption of a System-of-Systems (SoS) approach to analyzing PPP projects and proposes a framework for it. A top-down approach is used to identify the key components and their interrelationships. The analysis presented in this paper reveals the SoS taxonomy and lexicon for a PPP project and the hierarchical levels under it. The findings provide a step towards effectively analyzing the relationship within and across the various systems. They are expected to assist researchers in understanding and simulating the dynamics between the different subsystems.

Satisfaction and switching intention in mobile services: Comparing lock-in and free contracts in the Spanish market

Switching costs are a relevant issue affecting market competition in the mobile services industry. However, customer switching costs have not disappeared, since numerous leading mobile services companies use lock-in strategies, such as obliged long-term contractual relationships. The present study provides and empirically test a conceptual model in order to analyze the creation of customer satisfaction and switching intention with mobile services, as well as to examine the differences between lock-in and free contracts in a South European mature market – Spain. For this purpose, drawing on a sample of 370 customers, we developed Structural Equation Modeling (SEM) through a multi-group analysis. Our findings suggest that service quality is one of the key determinants of satisfaction, while the availability of attractive alternatives is the main switching barrier. Moreover, some interesting differences were found between the two type of contracts analyzed. Consequently, we suggest shifting resources to customer retention through improved service quality for reducing customer churn rate.

Employee Participation in Corporate Governance and Corporate Social Responsibility

The chapter investigates the impact of employee participation on the board of directors or supervisory board (particularly codetermination) on corporate social responsibility (CSR). Conceptually, it is important to distinguish between “internal” and “external” CSR. Internal CSR relates to practices of the firm regarding groups with which it is in a long-term contractual relationship such as employees. Employee participation systems serve to protect employees from shareholder opportunism and shift the balance in the distribution of corporate rents in favor of employees, which is why they clearly have an impact on internal CSR. The situation is much less clear for external CSR, which is concerned with effects of corporate activities that are externalities, for example pollution. I argue that there may sometimes be a tradeoff between internal and external CSR: If a firm is more profitable because it scores badly in terms of external CSR (e.g. because it habitually pollutes), employees may benefit similarly as shareholders. In fact, the interests of shareholders and employees may be largely aligned in this respect, with both either benefiting or being harmed concurrently.

Are They Pirates or Pioneers?

In a country where the money-monsters are not criticized and perceived like angels who can save the poor children, one the most profitable business is to use the consumption power of the Veblen-effected customers who are narrow-sighted and discriminatory. So called, the ‘license musicals’ bilaterally purchased from the Broadway, and Vienna are dominantly consumed in Korea. The buyers form the oligarchic industry in Korea, and run their own business, including the management company which trains, controls, and gives business to their actors, and boasts their long-term contractual relationship with the specific productions in the primary market. In Korea, those productions are the limited liability company (LL.C), and each has their style of selection; one favors the Broadway, another favors the European nobility in the 17-18 century, and the other favors the European knights’ fights in the earlier era. All of them are based on the Western old novels, adapted or transformed more than hundreds of times in the Western countries through various kinds of cultural formants, such as movies, TV dramas, plays, TV cartoons, ballets, and the merchandized products, and dramatico-musicals, etc, and sold internationally. Korean licensed musicals are the dramatico-musicals sold by some staggering Western musical productions, including their unlimited use and the void of the healthy application of the IP laws, due to their exclusivity of the dealing and undisclosed information towards the public. The paper argues how deceptive their arguments can be with the hidden purpose of the monetary benefits. The protection of the intellectual property right (IPR) is not applied when it is commercial; it only belongs to ‘unfair use’ no matter how expansive the royalty for the license is. In the US federal copyright law, licensing - permission to patron - is not subjected to the dramatico-musical; but subjected merely to the music itself. Thus, even the sellers in the US are illegal to sell this kind of dramatico-musical bilaterally in their own law; it will be better to understand this commercial transaction is a kind of international drug dealing which is culturally blinded to determine its legality with objectivity.

Real-Option Valuation of Build-Operate-Transfer Infrastructure Projects under Performance Bonding

This study assesses the effect of performance bonding on the valuation of a build-operate-transfer (BOT) project by extending the classical Black-Scholes-Merton (BSM) call option model. As common features in BOT contracts, a performance bond is a penalty imposed on concessionaires who exercise contractual rights to terminate participation in a project. In the real-option context, termination rights grant concessionaires the flexibility in managing market uncertainties that can increase the valuation of an infrastructure project, but the penalty impairs this flexibility and reduces valuations. A case study numerically illustrates the BSM model and indicates that performance bonding can destroy the flexibility and project valuations inherent in termination rights even when the penalty is moderate. Balancing performance bonds and termination rights is necessary because both are important in establishing and maintaining long-term contractual relationships in privatized BOT infrastructure projects.

Contract and Game Theory: Basic Concepts for Settings with Finite Horizons

This paper examines a general model of contract in multi-period settings with both external and self-enforcement. In the model, players alternately engage in contract negotiation and take individual actions. A notion of contractual equilibrium, which combines a bargaining solution and individual incentive constraints, is proposed and analyzed. The modeling framework helps identify the relation between the manner in which players negotiate and the outcome of the long-term contractual relationship. In particular, the model shows the importance of accounting for the self-enforced component of contract in the negotiation process. Examples and guidance for applications are provided, along with existence results and a result on a monotone relation between “activeness of contracting” and contractual equilibrium values.

The Role of Mediation in Arbitration: The Use and the Challenges of Multi-tiered Clauses in International Agreements

ABSTRACT: This article provides a general overview of the benefits and challenges of using multitiered clauses in international commercial contracts. As international trade grows and parties to international contracts seek speedier and more cost-effective mechanisms for resolving their disputes, it is likely that the use of multi-tiered clauses will increase. While multi-tiered clauses can provide greater flexibility to respond to various types of disputes that may arise in a contractual relationship, these clauses can also present various challenges. The main challenge in utilizing these types of clauses is generally a result of poor or careless drafting. The way in which a multi-tiered clause is structured and drafted can undermine the very benefits that these types of clauses are expected to offer. Keeping this in mind, a well-drafted multi-tiered clause can be tailored to meet the specific needs of a contractual relationship, giving the parties multiple avenues for resolving their dispute. This flexibility can help the parties arrive to a more mutually beneficial resolution of the dispute or in cases where the parties desire a long-term contractual relationship, help preserve that relationship.

The Enemy Within: Oil in the Niger Delta

The Enemy Within: Oil in the Niger Delta

The impact of repeated interactions on supply chain contracts: A laboratory study

Abstract In this laboratory study, we investigate the interactive behaviors that develop over a perceived long-term contractual relationship. Specifically, three types of contracts are examined under a two-echelon supply chain setting with stochastic demand: wholesale price contracts, buyback contracts and revenue-sharing contracts. The supply chain contracting theory has demonstrated that the simple linear price contract is inefficient; whereas the latter two contracts can coordinate the channel through risk-sharing, and they are mathematically equivalent. We propose an experimental design that controls for individual decision biases to isolate the behavioral impact of repeated negotiations. Our experimental results indicate that participants systematically deviate from predictions by the normative model that assumes a one-shot interaction between self-interested players. We find that when future opportunities to punish are available, social preferences for fairness and reciprocity are reinforced; and reputation-building behaviors are motivated to achieve long-term economic benefits. As a result, the performance of the overall supply chain is enhanced. Moreover, we observe that buyback contracts behave differently from revenue-sharing contracts by inducing higher order quantities over time.

International Multi-Party Projects: The Importance of Negotiating Process in Cross-Border Contractual Relationships

During contract negotiations we negotiate content but often forget process. Content- the subject of the transaction – is what parties have their focus on naturally. On the other hand, how parties will collaboratively achieve their goals (the process) is an often-overlooked aspect in contracting and contracts. Yet, this element of the contractual relationship is as important as arrangements with regard to the content to achieve successful results. This is particularly so in cross-border contractual relations, where miscommunication about the ‘how’ may easily lead to conflict and have significant consequences for achieving the goal of the agreement. Therefore, the question I address is what negotiators should address regarding the process of collaboration during the contracting process to minimize the chance of conflict and optimize the success of the parties’ efforts in a global market? I use the example of contracting for complex infrastructure projects to illustrate the interrelation between conflict, achieving the goals of the contractual agreement, and failure to discuss the collaboration process. Second, I draw upon literature on critical success factors to identify what elements related to the process of collaboration negotiators may want to include in the contract negotiations of long-term contractual relationships.

Legal Strategies in Upstream Oil and Gas Contracts to Attract Foreign Investment: Iran's Case

Legal Strategies in Upstream Oil and Gas Contracts to Attract Foreign Investment: Iran's Case

The Not-So-Dynamic Quality of Corporate Law: A UK Perspective on Hansmann's ‘Corporation and Contract’

In long-term contractual relationships, such as those between a company’s shareholders, adjustments to the terms of the relationship are likely to be necessary over time. In a stimulating article, Professor Hansmann has argued that this necessity entails an advantage of the law’s ‘default rules’, compared to the parties’ own express terms. The state is likely to update its default rules over time and, as it does so, the terms of the parties’ contracts that incorporate such defaults are likewise updated automatically. Updating the parties’ express terms, by contrast, may require the unanimous agreement of all contracting parties, or at least a special majority, opening up the likelihood of minority vetoes and opportunism. This ‘dynamic’ advantage of legal defaults best explains, Hansmann argues, the paucity of express contracting amongst shareholders. In the UK, however, the main body of company law’s default rules are found in the model articles of association. Yet those who accept these rules are not bound by subsequent amendments to them. This article seeks to explain, and to justify, this feature of UK company law. In so doing, it casts doubt on the preference of shareholders to allow a third party – even one as trusted as the state – to update automatically the terms of their relationship.

PRIVATE AUTONOMY AND MARITAL PROPERTY AGREEMENTS

AbstractAfter the Court of Appeal decision in Radmacher v Granatino, the question whether English law should introduce enforceable pre-nuptial or marital property agreements came into focus again. Taking the decision as a starting point, the article argues in favour of introducing such agreements. Adopting a comparative approach, the article explains how such agreements are used in Germany and demonstrates that the idea of private autonomy, which has been regarded as the basis of pre-nuptial property agreements in Germany since the 19th century, can explain why couples should be allowed to make their own decisions with respect to the financial consequences of the breakdown of their relationship. Analysis of the different notions of contract in German and English law as well as comparing marriage with partnerships and other long-term contractual relationships illustrates not only the historical reasons why such agreements have not been allowed so far, but also helps to understand what safeguards the legislator and the judiciary could apply to ensure that parties do not abuse their freedom.