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Contracts, Negotiation, and Learning: An Examination of Termination Provisions
Author(s) -
Ariño Africa,
Reuer Jeffrey J.,
Mayer Kyle J.,
Jané Juan
Publication year - 2014
Publication title -
journal of management studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 4.398
H-Index - 184
eISSN - 1467-6486
pISSN - 0022-2380
DOI - 10.1111/joms.12069
Subject(s) - negotiation , business , law and economics , microeconomics , economics , political science , law
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.