IDEAS home Printed from https://ideas.repec.org/a/taf/jecmet/v7y2001i3p313-339.html
   My bibliography  Save this article

Theoretical isolation in contract theory: suppressing margins and entrepreneurship

Author

Listed:
  • Kirsten Foss
  • Nicolai Foss

Abstract

We discuss contract theory from a combined Austrian/new institutional view. In the latter view, the world is seen as shot through with ignorance and transaction costs, but, as a tendency, entrepreneurial activity responds to the problems caused by these. All modelling must critically reflect this. This ontological commitment is contrasted to various isolations characteristic of contract theory, specifically the modelling strategy of introducing often ad hoc and unexplained constraints that suppress margins and possibilities of entrepreneurial actions that would be open to real-world decision-makers. We illustrate this by means of, for example, the treatment of asymmetric information under complete contracting and the notion of control rights under incomplete contracting.

Suggested Citation

  • Kirsten Foss & Nicolai Foss, 2001. "Theoretical isolation in contract theory: suppressing margins and entrepreneurship," Journal of Economic Methodology, Taylor & Francis Journals, vol. 7(3), pages 313-339.
    • Handle: RePEc:taf:jecmet:v:7:y:2001:i:3:p:313-339
    DOI: 10.1080/135017800453724
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/135017800453724
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/135017800453724?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817.
    2. Barzel,Yoram, 1997. "Economic Analysis of Property Rights," Cambridge Books, Cambridge University Press, number 9780521597135, February.
    3. Klaes, Matthias, 2000. "The Birth of the Concept of Transaction Costs: Issues and Controversies," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 9(4), pages 567-593, December.
    4. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Shastitko, Andrey & Golovanova, Svetlana, 2016. "Meeting blindly… Is Austrian economics useful for dynamic capabilities theory?," Russian Journal of Economics, Elsevier, vol. 2(1), pages 86-110.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Arruñada, Benito, 2017. "Property as sequential exchange: the forgotten limits of private contract," Journal of Institutional Economics, Cambridge University Press, vol. 13(4), pages 753-783, December.
    2. Bowe, Michael & Golesorkhi, Sougand & Yamin, Mo, 2014. "Explaining equity shares in international joint ventures: Combining the influence of asset characteristics, culture and institutional differences," Research in International Business and Finance, Elsevier, vol. 31(C), pages 212-233.
    3. Kirsten Foss & Nicolai J. Foss, 2004. "The Next Step in the Evolution of the RBV: Integration with Transaction Cost Economics," management revue - Socio-Economic Studies, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 15(1), pages 107-121.
    4. Foss Kirsten & Foss Nicolai & Klein Peter G. & Klein Sandra K., 2002. "Heterogeneous Capital, Entrepreneurship, and Economic Organization," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 12(1), pages 1-20, March.
    5. Patrick W. Schmitz, 2006. "Book Review," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 162(3), pages 535-542, September.
    6. Rossi, Enrico, 2020. "Reconsidering the dual nature of property rights: personal property and capital in the law and economics of property rights," LSE Research Online Documents on Economics 105840, London School of Economics and Political Science, LSE Library.
    7. Trevon D. Logan & Manisha Shah, 2013. "Face Value: Information and Signaling in an Illegal Market," Southern Economic Journal, John Wiley & Sons, vol. 79(3), pages 529-564, January.
    8. W. Bentley MacLeod, 2006. "Reputations, Relationships and the Enforcement of Incomplete Contracts," CESifo Working Paper Series 1730, CESifo.
    9. Corrado DI GUILMI, 2008. "Financial Determinants of Firms Profitability: A Hazard Function Investigation," Working Papers 315, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    10. Matyukha, Andriy, 2017. "Business groups in agriculture impact of ownership structures on performance: The case of Russia's agroholdings," Studies on the Agricultural and Food Sector in Transition Economies 254051, Institute of Agricultural Development in Transition Economies (IAMO).
    11. Vranken, Liesbet & Macours, Karen & Noev, Nivelin & Swinnen, Johan F.M., 2007. "Property Rights Imperfections, Asset Allocation, and Welfare: Co-Ownership in Bulgaria," 104th Seminar, September 5-8, 2007, Budapest, Hungary 7795, European Association of Agricultural Economists.
    12. Edward Gilmore & Ulf Andersson & Noushan Memar, . "How subsidiaries influence innovation in the MNE value chain," UNCTAD Transnational Corporations Journal, United Nations Conference on Trade and Development.
    13. Schmitz, Patrick W., 2006. "Book Review of “Contract Theory” (Bolton and Dewatripont, 2005)," MPRA Paper 6977, University Library of Munich, Germany.
    14. Albert H. Choi & George Triantis, 2021. "Contract Design When Relationship-Specific Investment Produces Asymmetric Information," The Journal of Legal Studies, University of Chicago Press, vol. 50(2), pages 219-260.
    15. repec:lic:licosd:18007 is not listed on IDEAS
    16. Ornelas, Emanuel & Turner, John L., 2007. "Efficient dissolution of partnerships and the structure of control," Games and Economic Behavior, Elsevier, vol. 60(1), pages 187-199, July.
    17. Khalil, Fahad & Lawarree, Jacques, 2001. "Catching the agent on the wrong foot: ex post choice of monitoring," Journal of Public Economics, Elsevier, vol. 82(3), pages 327-347, December.
    18. Besley, Timothy & Ghatak, Maitreesh, 2010. "Property Rights and Economic Development," Handbook of Development Economics, in: Dani Rodrik & Mark Rosenzweig (ed.), Handbook of Development Economics, edition 1, volume 5, chapter 0, pages 4525-4595, Elsevier.
    19. Benito Arruñada & Giorgio Zanarone & Nuno Garoupa, 2019. "Property Rights in Sequential Exchange," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 35(1), pages 127-153.
    20. Williamson, Oliver, 2009. "The Theory of the Firm as Governance Structure: From Choice to Contract," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 6, pages 111-134, December.
    21. Schmitz, Patrick W., 2010. "Contractual solutions to hold-up problems with quality uncertainty and unobservable investments," Journal of Mathematical Economics, Elsevier, vol. 46(5), pages 807-816, September.

    More about this item

    Keywords

    Contract Theory; New Institutional Economics; Austrian Economics; Entrepreneurship;
    All these keywords.

    JEL classification:

    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:jecmet:v:7:y:2001:i:3:p:313-339. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RJEC20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.