• Curriculum vitae

Formal contracts are a powerful tool for exchange, because they are backed by the power of the State and, therefore, allow parties to strongly commit to their agreements. However, formal contracts are also costly, because they must be enforced by third parties, such as courts, who are alien to the contractual relationship. Informal contracts, which are enforced by the parties themselves, can reduce these costs, but, because they are not backed by the power of the State, they also create new opportunities for non-compliance. Hence, depending on the technology, the legal system, and the nature of the relationship, it may be optimal to use formal contracts, informal contracts, or a blend of the two. Based on classic and recent theories, empirical evidence, and case studies, this workshop will discuss the interaction between formal and informal contracts, both within and between firms, touching upon diverse aspects of organizational design like incentive contracts, decision rights, and the boundaries of firms. The workshop will also discuss some methodological issues in the empirical study of informal contracts, and highlight promising paths for future research.

In innovation-driven global markets, resilient and collaborative contractual relationships (with employees, suppliers, and strategic partners) are critical to firms' success. This makes the ability to govern these relationships a key source of firms' competitive advantage and, at a macro level, of economic growth and development. In this lecture I build on contract theory and transaction cost analysis to highlight new research trajectories and opportunities in the economics of governance. I begin by discussing two underexplored dimensions of the classic view of contracts as enforcement mechanisms: (1) the interaction of formal and relational governance, and (2) how governance is affected by the political environment in which firms operate. I then consider novel approaches to contracts and governance, which shift the focus from enforcement to relationship management. In this second part of the lecture, I discuss recent models, cases and evidence that portray (3) contracts as coordination mechanisms, whose purpose is to provide clarity and guiding principles to ongoing collaborations facing new problems. I conclude by suggesting directions for policy-relevant research on contracts and governance.