Contractual Networks, Inter-Firm Cooperation and Economic Growth
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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.
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Chapter 4: Contractual Networks and Contract Theory: A Research Agenda for European Contract Law

Fabrizio Cafaggi


Fabrizio Cafaggi Contractual networks are created to coordinate activities by legally independent parties who cooperate to achieve a common objective without creating a new corporate entity.1 They emerge when there is a high degree of uncertainty2 about the output of the common project, a high level of specific investment is necessary, and knowledge produced during the contractual relationship cannot be easily appropriated by individual enterprises. By ensuring a higher level of peer monitoring they contribute to solving observability problems concerning contractual performance. They often constitute an alternative to the fragmentation of ownership 1 Contractual networks are hybrid forms of organizations located between markets and hierarchies. See F. Cafaggi, ‘Contractual Networks and the Small Business Act: Towards European Principles?’, (2008) 4 European Review of Contract Law 49, 495. See also O. Williamson, Markets and Hierarchies: Analysis and Antitrust Implications (New York: Free Press, 1979); O. Williamson, ‘The Economics of Governance’, (2005) American Economic Review 1; W.W. Powell, ‘Neither Markets nor Hierarchy: Network Forms of Organization’, in L.L. Cummings and B. Shaw (eds), Research in Organizational Behaviour (Greenwich: JAI Press, 1990); C. Menard, ‘The Economics of Hybrid Organizations’, (2004) 3 Journal of Institutional and Theoretical Economics 345; D. Campbell, H. Collins and J. Wightman, Implicit Dimensions of Contract: Discrete Relational and Network Contracts (Oxford: Hart, 2003); A. Schwartz and R.E. Scott, ‘Contract Theory and the Limits of Contract Law’, (2003) Yale Law Journal 541; G. Teubner, ‘Coincidentia Oppositorum: Hybrid Networks beyond Contract and Organisations’ (2006), available at; V.P....

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