Managing Discrepancies between Formal and Psychological Sides of Alliance Contracting

Abstract

This study explores the formal and the psychological sides of alliance contracting. In interpreting the findings of a multiple-case study and interviews with juridical experts, we first show potential discrepancies between these two sides of alliance contracting. Our analysis of both formal and psychological aspects of contracting then highlights the need to extend the notion of alignment as developed in Transaction Cost Economics. Next, we suggest which contracting capabilities can be developed to reduce the discrepancies between formal and psychological sides of alliance contracting. These results enable us to derive implications for research on contractual governance, contracting capabilities, and management of strategic alliances.