The Diffusion of Deal Innovations in Complex Contractual Networks

42 Pages Posted: 13 Jan 2023 Last revised: 7 Dec 2023

See all articles by Kristina Bishop

Kristina Bishop

Brigham Young University - J. Reuben Clark Law School

Matthew Jennejohn

Brigham Young University - J. Reuben Clark Law School

Cree Jones

BYU Law School

Date Written: December 27, 2022

Abstract

We introduce a new methodology for studying contractual evolution in complex markets. We situate the diffusion of a deal innovation within an advisory network and then provide methods for inferring a law firm's preference for adopting the innovation and for calculating each firm's proximity to prior adopters. This allows for granular analysis of firm-to-firm interactions as a diffusion mechanism.

To demonstrate, we study the top-up option’s diffusion in two-step tender offers from 1999 to 2013. Diffusion occurs readily when a firm is directly connected to a prior adopter of the option: directly connected firms are 274 percent more likely to adopt relative to unconnected firms. This correlation’s magnitude is akin to a firm changing its overall centrality within the advisory network from a median firm to a top-decile firm. These results demonstrate the importance of firm-to-firm information transfers to contractual evolution and underscore their study as a research priority.

Keywords: Contracts, Innovation, Evolution, Networks, Diffusion

JEL Classification: K12, K22

Suggested Citation

Bishop, Kristina and Jennejohn, Matthew and Jones, Cree, The Diffusion of Deal Innovations in Complex Contractual Networks (December 27, 2022). BYU Law Research Paper No. 23-22, Available at SSRN: https://ssrn.com/abstract=4313301 or http://dx.doi.org/10.2139/ssrn.4313301

Kristina Bishop

Brigham Young University - J. Reuben Clark Law School ( email )

430 JRCB
Brigham Young University
Provo, UT 84602
United States

Matthew Jennejohn (Contact Author)

Brigham Young University - J. Reuben Clark Law School ( email )

436 JRCB
Brigham Young University
Provo, UT 84602
United States
9175093028 (Phone)

Cree Jones

BYU Law School ( email )

430 JRCB
Brigham Young University
Provo, UT 84602
United States

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