Relational Contracts and Organizational Capabilities

By Robert Gibbons, Rebecca Henderson. Organ. Sci., 2012

457 citations recorded by the source corpus.

A large literature identifies unique organizational capabilities as a potent source of competitive advantage, yet our knowledge of why capabilities fail to diffuse more rapidly—particularly in situations in which competitors apparently have strong incentives to adopt them and a well-developed understanding of how they work—remains incomplete. In this paper we suggest that competitively significant capabilities often rest on managerial practices that in turn rely on relational contracts (i.e., informal agreements sustained by the shadow of the future). We argue that one of the reasons these practices may be difficult to copy is that effective relational contracts must solve the twin problems of credibility and clarity and that although credibility might, in principle, be instantly acquired, clarity may take time to develop and may interact with credibility in complex ways so that relational contracts may often be difficult to build.

Subfields: Accounting, Management Information Systems, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/34f9ee20efdbb784f660e25d281d044dae54557b

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Citations in the corpus

The Mirroring Hypothesis: Theory, Evidence and Exceptions (2016, background): “The economic form, as discussed by Baker, Gibbons, and Murphy (2002) and Gibbons and Henderson (2012), assumes that agents are self-interested but able to calculate the present value of a continuing relationship.”
The Many Futures of Contracts (2014, background): “This implicit expectation highlights the inherently incomplete nature of contracts and may be very difficult to build (see, e.g., gibbons & Henderson, 2012).”
Turning Lead into Gold: How Do Entrepreneurs Mobilize Resources to Exploit Opportunities? (2018, unknown): “The concept of a relational or implicit contract refers to an agreement between two parties that is not legally formalized, but which is self-reinforcing (Gibbons & Henderson, 2012).”
Dynamic Capabilities and Organizational Agility: Risk, Uncertainty, and Strategy in the Innovation Economy (2016, unknown): “Such arrangements allow for more timely accommodations and adjustments.(55) Of course, leadership and learning is”
Does Management Matter? Evidence from India (2011, unknown): “The management literature on the reasons for such inefficiency has tended to focus on three main drivers (e.g. Rivkin 2000, and Gibbons and Henderson 2011).”
Corporate Purpose and Financial Performance (2019, background): “In such cases, where actions cannot be readily observed and quantified, firms rely on relational contracts rather than on formal legally enforceable contracts (Gibbons and Henderson, 2012).”
Blockchain Governance—A New Way of Organizing Collaborations? (2020, background): “Relational governance ultimately rests on enforcement through the “ shadow of the future ” (Gibbons and Henderson 2012, Poppo et al. 2008a) or the threat of terminating the collaboration and thus foregoing future bene ﬁ ts stemming from it (Gil and Zanarone 2017).”
Capital Allocation and Delegation of Decision-Making Authority within Firms (2014, result): “1 This result is consistent with the existence of relational contracts between the CEO and managers (Gibbons and Henderson, 2012).”