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Paper info: Use of the written contract in long-lasting business relationships

Title


Use of the written contract in long-lasting business relationships

Authors


Pervez Ghauri and Tommy Roxenhall

Place of Publication


The paper was published at the 18th IMP-conference in Perth, Australia in 2002.

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Abstract


In most business relationships, written contracts are not drawn up, since businessmenfind the drawing of written contracts both complicated and a waste of time. There are,of course, companies that draw up detailed written contracts, but those contracts areseldom applied as a means to settle disputes. Nor is the contracted party sued orthreatened to be summoned to court. Instead, the written contract is available ifsomething very extraordinary occurs. They are primarily made when their use valueexceeds the cost of making of the written contracts. A detailed written contract can forinstance, function as a means of communication. Since knowledge about writtencontracts for internal reasons is limited, there was every reason to continue studyinghow written contracts are used. In an endeavour to find possible factors to explain theuse of written contracts, the interaction model is used as a point of departure(Håkansson 1982).Since contracts can be subdivided into richly varied and multidimensional processes, itis necessary to study them at a detailed level. Furthermore, to achieve a more holisticaccount, it is necessary to make use of both oral and written sources. In all, there are14 propositions in this study. The empirical results demonstrate that the most importantexplanation for the use of the written contracts are the qualities inherent in the writtencontract itself, not the contract negotiations or the closeness between the party andother influencing factors. The written contract itself directly influences the actual use ofthe written contract. The production technologies of the individual parties, the productexchange between them, and the possible existence of standardised written contracts forthe line of business in question influences the written contract. The closeness betweenthe parties influences the written contract as well as the contract negotiations and thecontract negotiations influence the written contract and the closeness between theparties.