Third Parties and Contract Design: The Case of Contracts for Technology Transfer

Abstract

Given the challenges associated with drafting technology-transfer contracts, we examine decisions to involve third parties offering technical or legal support in the contract-drafting process. We first argue that the attributes of the transaction are key drivers of third-party involvement. We then draw on the behavioral theory of the firm to develop arguments regarding the influence of third parties on contract complexity. Our results reveal that the involvement of legal third parties tends to magnify the contract's overall complexity. In contrast, the involvement of technical third parties reduces the inclusion of monitoring provisions and increases the inclusion of coordination provisions. Copyright © 2015 John Wiley & Sons, Ltd.