| By: |
Gralf-Peter Calliess (University of Bremen - Faculty of Law & ZenTra);
Stephan Freiherr von Harder (University of Bremen - Faculty of Law) |
| Abstract: |
While intra-firm trade accounts for at least one third of world exports, we
know very little about the institutions which are employed to resolve
intra-firm trade conflicts. According to Oliver Williamson, courts are not
accessible and conflicts resulting from intra-firm trade are resolved by
directives based on the authority of ownership instead (law of forbearance).
Williamson's description of the law of forbearance, however, depicts an ideal
typical form of a firm, which is characterised by low incentive intensity and
high administrative costs. Yet, in order to improve on these attributes, large
transnational enterprises changed their organisational structure in the past
decades. Nowadays, large-scale enterprises usually have a decentralised
structure and use intra-firm pricing and incentive systems. Against this
backdrop, Williamson's description of the contract law regime of intra-firm
trade appears all too general. This paper addresses the question of how
contract enforcement in transnational corporations is institutionally
organized on the basis of preliminary results of expert interviews conducted
with officials from transnational corporations. In a first step we illustrate
that conflicts originating in intra-firm transactions are basically of the
same type and nature than conflicts arising out of market transactions. We
argue that the settlement of these disputes is of relevance both for legal
(e.g. corporate and tax law) and economic reasons (e.g. coordination, control
and motivation functions of profit centers). In a second step we analyze the
governance mechanisms which are employed by transnational corporations to
resolve intra-firm trade conflicts. |
| Keywords: |
transaction cost economics, intra-firm trade, private ordering, alternative dispute resolution, mediation, arbitration, transnational law |
| JEL: |
D23 D29 D74 K12 K40 L22 M52 |
| Date: |
2012–10 |
| URL: |
http://d.repec.org/n?u=RePEc:zen:wpaper:01&r=law |