Contracts, Negotiation, and Learning: An Examination of Termination Provisions

27 Pages Posted: 27 Mar 2014

See all articles by Africa M. Arino

Africa M. Arino

University of Navarra, IESE Business School

Jeffrey J. Reuer

Purdue University - Krannert School of Management

Kyle Mayer

University of Southern California - Management and Organization Department

Juan Jané

University of Navarra; Hewlett-Packard Enterprise - Hewlett-Packard Company

Date Written: May 2014

Abstract

Taking a temporal view of learning in partnerships, we argue that learning to contract from prior relationships can be manifested not only in an increase in the level of contractual detail but also in a decrease in negotiation time for a given level of contractual detail. We analyse the influence that the length of prior relationships and the detail of termination provisions have on negotiation time, or the time period that it takes for partners to reach a mutually acceptable agreement. We find that: (1) the length of prior relationships has a curvilinear, U‐shaped effect on negotiation time, suggesting the possibility of diverse learning mechanisms as the relationship unfolds; (2) the impact of the detail of termination provisions on negotiation time varies across different types of termination provisions; and (3) it takes a shorter time to negotiate certain types of termination provisions when partners have longer prior relationships. Beyond suggesting the need to investigate the consequences of contractual provisions for collaborators, our study proposes negotiation time as an additional indicator of a learning‐to‐contract effect that complements existing ones.

Keywords: contracts, learning, negotiation time, partnerships, prior relationships, termination provisions

Suggested Citation

Ariño, Africa M. and Reuer, Jeffrey J. and Mayer, Kyle and Jané, Juan, Contracts, Negotiation, and Learning: An Examination of Termination Provisions (May 2014). Journal of Management Studies, Vol. 51, Issue 3, pp. 379-405, 2014. Available at SSRN: https://ssrn.com/abstract=2416603 or http://dx.doi.org/10.1111/joms.12069

Africa M. Ariño (Contact Author)

University of Navarra, IESE Business School ( email )

Avenida Pearson 21
Barcelona, 08034
Spain

Jeffrey J. Reuer

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States

Kyle Mayer

University of Southern California - Management and Organization Department ( email )

Los Angeles, CA 90089
United States

Juan Jané

University of Navarra

Camino del Cerro del Aguila, 3
Pamplona, Navarra 31080
Spain

Hewlett-Packard Enterprise - Hewlett-Packard Company

United States

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