On the genesis of interfirm relational contracts

Abstract

In a wide range of circumstances, relational contracts can enable strategies that might not otherwise be possible. While most studies focus on the maintenance and performance of existing relational contracts, this paper explores the origins of interfirm relational contracts, focusing on how firms go from no contract to a relational contract. Relying on a microanalytic investigation of the birth of the desktop laser printer industry, we identify a combination of four emergent and deliberate steps that enhance the probability that a relational contract will arise: preexisting personal relationships, capability complementarity, cultural similarity, and pursuit of noncompeting but mutually reinforcing revenue models. We consider how each of these factors helps to undergird the parties' clarity and credibility to increase the probability of the genesis of a relational contract, which in turn enables collaborating firms to undertake successful, difficult-to-imitate strategies.