Contractual Networks, Inter-Firm Cooperation and Economic Growth

Contractual Networks, Inter-Firm Cooperation and Economic Growth

Edited by Fabrizio Cafaggi

This insightful book presents a legal and economic analysis of inter-firm cooperation through networks as an alternative to vertical integration. It examines comparatively various forms of collaboration, ranging from consortia to multiparty joint ventures and from franchising to dealerships.

Chapter 1: Introduction

Fabrizio Cafaggi

Subjects: business and management, organisational innovation, innovation and technology, organisational innovation, law - academic, commercial law, private international law


Fabrizio Cafaggi CONTRACTUAL NETWORKS, VERTICAL DISINTEGRATION AND INTER-FIRM COOPERATION Historically, networks of firms have preceded the vertically integrated firm and, to a certain extent, markets, at least within the contemporary meaning, attached to this particular form of organization.1 In this book, the focus is on networks for the production of goods and services. However, it should be underlined that contractual networks have largely been deployed to create and regulate markets. In the area of the electronic trading platform, contractual networks define the common rules that preside over the individual transactions of the members who have subscribed to the platform.2 Contractual networks have also flourished in the area of regulated markets where technological factors may ‘impose’ sharing common platforms for production or more often distribution. Examples range from electricity to telecommunications, from banking to insurance. Networks of firms have different forms, including contractual, organizational and combined. Often enterprises start with a contractual network that is perceived as a lighter form of commitment, but which subsequently evolves into an organizational network. Notice that even in the case of contractual networks, enterprises create a new company but preserve their own legal and economic independence. At other times the organizational network ‘integrates’ the contractual one. This combination can take different forms: in its softest version, firms make a governance agreement for a mutual interlocking directorate. Each firm, even without owning shares, has the right to appoint a member of the other firm’s board. Stronger 1 C. Sabel and J. Zeitlin, World of Possibilities: Flexibility...