The Many Futures of Contracts: Moving Beyond Structure and Safeguarding to Coordination and Adaptation

In this article, we review the literature on interfirm contracting in an effort to synthesize existing research and direct future scholarship. While transaction cost economics (TCE) is the most prominent perspective informing the optimal governance and safeguarding function of contracts, our review indicates other perspectives are necessary to understand how contracts are structured: relational capabilities (i.e., building cooperation, creating trust), firm capabilities, relational contracts, and the real option value of a contract. Our review also indicates that contract research is moving away from a narrow focus on contract structure and its safeguarding function toward a broader focus that also highlights adaptation and coordination. We end by noting the following research gaps: consequences of contracting, specifically outcome assessment; strategic options, decision rights, and the evolution of dynamic capabilities; contextual constraints of relational capabilities; contextual constraints of contracting capabilities; complements, substitutes, and bundles; and contract structure and social process.