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Contractual Complexity and the Cognitive Load of R&D Alliance Contracts

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  • John Hagedoorn
  • Geerte Hesen

Abstract

We offer a new perspective on measuring the complexity of interfirm contracts. We define complex contracts as those contracts that contain many elements (clauses) with a relatively large number of interdependencies that also impose a significant cognitive load on contract parties. Previous studies on contractual complexity employ objective measures such as the number of pages, the number of kilobytes, or the number of provisions to measure this complexity. Following some suggestions in the literature, we argue that the degree to which a contract imposes a cognitive load on contract parties should be taken as another important dimension of contractual complexity. We develop a conceptual model of the complexity of contracts using a multidimensional perspective where both objective and subjective dimensions are taken into account. Our empirical analysis combines a sample of nearly 400 R&D alliance contracts in the biopharmaceutical industry with a measurement of the cognitive load of these contracts. Our findings show that quantitative, objective measures of complexity, such as length, and objective as well as subjective elements of the cognitive load of contracts, that is, the information‐processing effort that contractual parties have to make, do indeed measure different aspects of contractual complexity.

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  • John Hagedoorn & Geerte Hesen, 2009. "Contractual Complexity and the Cognitive Load of R&D Alliance Contracts," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 6(4), pages 818-847, December.
    • Handle: RePEc:wly:empleg:v:6:y:2009:i:4:p:818-847
    DOI: 10.1111/j.1740-1461.2009.01161.x
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    Cited by:

    1. Malhotra, Deepak & Lumineau, Fabrice, 2011. "Trust and collaboration in the aftermath of conflict: the effects of contract structure," MPRA Paper 38358, University Library of Munich, Germany.
    2. Lumineau, Fabrice & Malhotra, Deepak, 2011. "Shadow of the contract: how contract structure shapes inter-firm dispute resolution," MPRA Paper 38359, University Library of Munich, Germany.
    3. Duplat, Valérie & Coeurderoy, Régis & Hagedoorn, John, 2018. "Contractual governance and the choice of dispute-resolution mechanisms: Evidence on technology licensing," Research Policy, Elsevier, vol. 47(6), pages 1096-1110.
    4. George Hendrikse & Patrick Hippmann & Josef Windsperger, 2015. "Trust, transaction costs and contractual incompleteness in franchising," Small Business Economics, Springer, vol. 44(4), pages 867-888, April.
    5. Okamuro, Hiroyuki & Nishimura, Junichi, 2018. "Whose business is your project? A comparative study of different subsidy policy schemes for collaborative R&D," Technological Forecasting and Social Change, Elsevier, vol. 127(C), pages 85-96.
    6. Nishimura, Junichi & Okamuro, Hiroyuki, 2018. "Internal and external discipline: The effect of project leadership and government monitoring on the performance of publicly funded R&D consortia," Research Policy, Elsevier, vol. 47(5), pages 840-853.
    7. OKAMURO, Hiroyuki & 岡室, 博之 & NISHIMURA, Junichi, 2015. "Governance and Performance of Publicly Funded R&D Consortia," CCES Discussion Paper Series 60, Center for Research on Contemporary Economic Systems, Graduate School of Economics, Hitotsubashi University.
    8. Carolin Haeussler & Matthew J. Higgins, 2012. "Explaining Preferences for Control Rights in Strategic Alliances: A Property Rights and Capabilities Perspective Approach," NBER Working Papers 18364, National Bureau of Economic Research, Inc.

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