Developing cooperative project client-supplier relationships: How much to expect from relational contracts?

California Management Review

Volumn 51, Issue 2, 2009, Pages

  Gil, Nuno ^a  

^a UNIVERSITY OF MANCHESTER   (United Kingdom)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 65249138860     PISSN: 00081256     EISSN: None     Source Type: Journal    
DOI: 10.2307/41166484     Document Type: Review

References (69)

1. This effort has been accompanied by a scholarly movement termed "Lean Construction." For seminal works, see L. Koskela, Application of the New Production Philosophy to Construction, CIFE Technical Report 72, Stanford University, 1992;
2. I.D. Tommelein, "Pull-Driven Scheduling for Pipe-Spool Installation: Simulation of Lean Construction Technique," ASCE, Journal of Construction Engineering and Management, 124/4 (1998): 279-288.
3. See I. Macneil, "Relational Contract Theory as Sociology: A Reply to Professors Lindbenberg and De Vos," Journal of Institutional and Theoretical Economics, 143 (1987): 272-290.
4. For classic works on the concept of a contract as a flexible framework for yielding rules, involving open-ended, vague provisions (of dubious legal enforceability), see K.N. Llewellyn, "What Price Contract? An Essay in Perspective," Yale Law Journal, 40 (1931): 704-751.
5. For a condensed and edited summary of Macneil's work, see I. Macneil, edited by David Campbell, The Relational Theory of Contract: Selected Works of Ian Macneil (London: Sweet & Maxwell, 2001).
6. This work and this reflection refer to contracts involving written forms, but the term "relational contracts" has also been used to refer to informal agreements sustained by the value of future relationships. See, for example, G. Baker, R. Gibbons, and K.J. Murphy, "Relational Contracts and the Theory of the Firm," The Quarterly Journal of Economics, 117/1 (February 2002): 39-84.
7. See, for example, O. Williamson, The Economic Institutions of Capitalism. (New York, NY: Free Press 1985);
8. K. Monteverde and D. Teece, "Appropriable Rents and Quasi-Vertical Integration," Journal of Law and Economics, 25/2 (October 1982): 321-328.
9. See, for example, R. Gulati, "Does Familiarity Breed Trust? The Implications of Repeated Ties for Contractual Choice in Alliances," Academy of Management Journal, 38/1 (February 1995): 85-112;
10. M. Granovetter, "Economic Action and Social Structure: The Problem of Embeddedness," American Journal of Sociology, 91 (1985): 481-510;
11. S. Maccaulay, "Non-Contractual Relations in Business: A Preliminary Study," American Sociological Review, 28 (1963): 55-69.
12. See, for example, J.P. Womack, D.T. Jones, and D. Roos, The Machine that Changed the World (New York, NY: Harper Perennial, 1990);
13. J.K. Liker, R.R. Kamath, S.N. Wasti, and M. Nagamachi, "Supplier Involvement in Automotive Component Design: Are There Really Large U.S. Japan Differences?" Research Policy, 25/1 (January 1996): 59-89.
14. Williamson, op. cit.
15. For an analysis of the fragmentation of these supply chains, see E. Cacciatori and M.G. Jacobides, "The Dynamic Limits of Specialization: Vertical Integration Reconsidered," Organization Studies, 26/12 (2005): 1851-1883.
16. A.L. Stinchcombe and CA. Heimer, Organization Theory and Project Management (Oslo: Norwegian University Press, 1985).
17. S.R. Clegg, T.S. Pitsis, T. Rura-Polley, and M. Marosszeky, "Governmentality Matters: Designing an Alliance Culture of Inter-Organizational Collaboration for Managing Projects," Organization Studies, 23/3 (2002): 317-337.
18. For a thorough discussion, see M. Bensaou, "Portfolios of Buyer-Supplier Relationships," Sloan Management Review, 40/4 (Summer 1999): 35-44.
19. See K.J. Mayer and N.S. Argyres, "Learning to Contract: Evidence from the Personal Computer Industry," Organization Science, 15/4 (July/August 2004): 394-410;
20. N. Argyres and K.J. Mayer, "Contract Design as a Firm Capability: An Integration of Learning and Transaction Cost Perspectives," Academy of Management Review, 32/4 (2007): 1060-1077.
21. rd Edition (Thousand Oaks, CA: Sage Publications, 2003).
22. For a discussion how single-setting research can help to "see new theoretical relationships and question old ones," see W.G. Dyer and A.L. Wilkins, "Better Stories and Better Constructs: The Case for Rigour and Comparative Logic," Academy of Management Review, 16/3 (1991): 613-619.
23. For a discussion on the ever-changing nature of large-scale projects, see A. Stinchcombe, Delays and Project Administration in the North Sea, Rapport nr. 14, The Institute of Industrial Economics, Bergen, Norway, 1979.
24. See N. Gil, "On the Value of Project Safeguards: Embedding Real Options in Complex Products and Systems," Research Policy, 36/7 (2007): 980-999;
25. N. Gil, S. Beckman, and I. Tommelein, "Upstream Problem-Solving under Uncertainty and Ambiguity: Evidence from Airport Expansion Projects," IEEE Transactions on Engineering Management, 55/3 (2008): 508-522.
26. I.R. Macneil, "Barriers to the Idea of Relational Contracts," in F. Nicklish, ed.. The Complex Long-Term Contract (Heidelberg: C.F. Muller Juristischer Verlag, 1987), pp. 31-44.
27. L. Poppo and T. Zenger, "Do Formal Contracts and Relational Governance Function as Substitutes or Complements?" Strategic Management Journal, 23/8 (August 2002): 707-725.
28. Stinchcombe and Heimer, op. cit. For making communications authoritative, see also C.I. Barnard, "Function and Pathology of Status Systems in Formal Organizations," in William F. Whyte, ed., Industry and Society (London: McGraw-Hill, 1946), pp. 46-83.
29. See I.R. Macneil, The New Social Contract: An Inquiry into Modern Contractual Relations (New Haven, CT: Yale University Press, 1980).
30. See I.R. Macneil, "Contracts: Adjustments of Long-Term Economic Relations under Classical, Neoclassical, and Relational Contract Law," Northwestern University Law Review, 72 (1978): 854-905.
31. M. Sako, Prices, Quality and Trust: Inter-Firm Relations in Britain and Japan (Cambridge: Cambridge University Press, 1992).
32. Clegg et al., op. cit.
33. Treated by Williamson [op. cit.] as forms of "trilateral governance."
34. Williamson, op. cit.
35. See T. Knott, No Business as Usual: An Extraordinary North Sea Result, The British Petroleum Company, plc, 1996.
36. Sir John Egan was the CEO of BAA from 1990 to 1999 after a career in the automotive industry.
37. For early comparative studies, see S. Helper, "How Much Has Really Changed between U.S. Auto-Makers and Their Suppliers?" Sloan Management Review, 32 (1991): 127-143;
38. Liker et al., op. cit.; J.K. Liker and Yen-Chun Wu, "Japanese Automakers, U.S. Suppliers, and Supply-Chain Superiority," Sloan Management Review, 42/1 (Fall 2000): 81-93.
39. Jim Ross, "Introduction to Project Alliancing," Proceedings of the Alliance Contracting Conference, Sydney, Australia, 2003.
40. nd edition (Reading, MA: Addison-Wesley, 1979).
41. See T.S. Pitsis, S.R. Clegg, M. Marosszeky, and T. Rura-Polley, "Constructing the Olympic Dream: A Future Perfect Strategy of Project Management," Organization Science, 14/5 (September/October 2003): 574-590.
42. See N.M. Post, "A New Process Paradigm," Engineering News-Record, November 26, 2007. Other related initiatives include the new forms of contract issued by the American Institute of Architects (A201-2007) and by a consortium of independent groups (ConsensusDOCS).
43. For more on the Toyota Production system, see Womack et al. op. cit.; M. Sako, "The Role of Trust in Japanese Buyer-Supplier Relationships," Ricerche Economiche, 45 (1991): 2-3;
44. J.H. Dyer and K. Nobeoka, "Creating and Managing a High-Performance Knowledge-Sharing Network: The Toyota Case," Strategic Management Journal, 21/3 (2000): 345-367.
45. Womack et al., op. cit., p.155.
46. For a thorough discussion on the capabilities of system integrators, see A. Davies, T. Brady, and M. Hobday, "Charting a Path Toward Integrated Solutions," Sloan Management Review, 47/3 (Spring 2006): 39-48;
47. Andrew Davies, David Gann, and Tony Douglas, "Innovation in Megaprojects: Systems Integration at London Heathrow Terminal 5," California Management Review, 51/2 (Winter 2009) [this issue].
48. Dyer and Nobeoka, op. cit.
49. Dyer and Nobeoka, op. cit.
50. For research at the basis of ProjectFlow, see G. Ballard, The Last Planner System of Production Control, doctoral dissertation, School of Civil Engineering, The University of Birmingham, UK, 2000;
51. H.J. Choo, I.D. Tommelein, G. Ballard, and T.R. Zabelle, "WorkPlan: Constraint-Based Database for Work Package Scheduling," Journal of Construction Engineering and Management, 125/3 (1999): 151-160.
52. R.G. Cooper, "Stage-Gate Systems: A New Tool for Managing New Products," Business Horizons, 33/3 (May/June 1990): 44-54.
53. See J. Dyer, "Does Governance Matter? Keiretsu Alliances and Asset Specificity as Sources of Japanese Competitive Advantage," Organization Science, 7/6 (November/December 1996): 649-666; A. Saxenian, Regional Advantage (Cambridge, MA: Harvard University Press, 1994).
54. Gulati, op. cit.
55. Dyer and Nobeoka, op. cit.
56. The same director would argue in 2007 that "BAA could have saved at least £0.5billion" had it implemented the T5 agreement in a different way.
57. "Business: Up, Up and Away," The Economist, July 24, 2004.
58. Sharer observed a similar reluctance to accommodate change with defense contractors even when they were also reimbursed for the costs. See F.M. Scherer, The Weapons Acquisition Process: Economic Incentives (Boston, MA: Division of Research, Harvard Business School, 1964).
59. Pitsis et al., op. cit.
60. Mayer and Argyres, op. cit.
61. The loci of contract design capabilities are dispersed among engineers, managers, and lawyers. For work on how organizations need to align the knowledge of the different groups (with respect to various types of contract terms) with the writing of the different types of contractual provisions, see Argyres and Mayer, op. cit.
62. R. Miller and D. Lessard, The Strategic Management of Large Engineering Projects (Cambridge, MA: MIT Press, 2000).
63. See S.J. Carson, A. Madhok, and T. Wu, "Uncertainty, Opportunism, and Governance: The Effects of Volatility and Ambiguity on Formal and Relational Contracting," Academy of Management Journal, 49/5 (2006): 1058-1077.
64. Stinchcombe goes further in noting that control in reimbursable contracts is also needed to prevent individuals from practicing corruption in procurement, time sheet, and payment activities. Stinchcombe and Heimer (1985), op. cit.
65. J. Richardson, "Parallel Sourcing and Supplier Performance in the Japanese Automobile Industry," Strategic Management Journal, 14/5 (July 1993): 339-350.
66. Williamson, op. cit.
67. See J.H. Dyer, D.S. Cho, and W. Chu, "Strategic Supplier Segmentation: The Next 'Best Practice' in Supply Chain Management," California Management Review, 40/2 (Winter 1998): 57-77;
68. Sako, op. cit.; Bensaou, op. cit; A. Kaufman, C.H. Wood, and G. Theyel, "Collaboration and Technology Linkages: A Strategic Supplier Typology," Strategic Management Journal, 21/6 (June 2000): 649-663.
69. In the face of flights cancelled, bags going astray, and huge queues building up, the British press called it "the T5 opening fiasco," a discussion outside the scope of this reflection.