Unpacking Contract Capabilities: Shaping Behavior by Implementing Appropriate Contract Framing

Abstract

Contract design capabilities are extended in this paper by examining firms' differential abilities to implement appropriate framing in exchange contracts. Firms must first determine whether a prevention or promotion frame produces appropriate behavior for the task characteristics. Then, to implement this framing in task-specific clauses, they must align negotiators frames with those suggested by the task characteristics. This process is further complicated because firms must also align the framing of non-task clauses with the frame induced by the firm's own culture. Because this process is so complex, a firm that excels at implementing appropriate contract framing enjoys increased exchange success and sustained competitive advantage, as a result of this distinct contract design capability.