Let's work it out (Or we'll see you in court...): Litigation and private dispute resolution in vertical exchange relationships

Lumineau, F; Oxley, J

Let's work it out (Or we'll see you in court...): Litigation and private dispute resolution in vertical exchange relationships

Lumineau, F Oxley, J

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Publisher:: INFORMS
Publication Type:: Journal Article
Citation:: Organization Science, 2012, 23 (3), pp. 820 - 834
Issue Date:: 2012-01

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Field	Value	Language
dc.contributor.author	Lumineau, F	en_US
dc.contributor.author	Oxley, J	en_US
dc.date.issued	2012-01	en_US
dc.identifier.citation	Organization Science, 2012, 23 (3), pp. 820 - 834	en_US
dc.identifier.issn	1047-7039	en_US
dc.identifier.uri	http://hdl.handle.net/10453/18894
dc.description.abstract	We examine how partners in vertical exchange relationships actually resolve disputes that are sufficiently serious to get lawyers involved. Reaching beyond the usual domain of organizational and management research, we leverage findings from law and economics to offer a novel organizational perspective on litigation and private dispute resolution, and we develop hypotheses about the likelihood of litigation in different exchange settings. Our empirical analysis generates three sets of new findings: First, counter to the received wisdom, we see that the involvement of lawyers does not necessarily signal the bitter end of an exchange relationship, because firms frequently manage to avoid litigation and resolve their disputes privately, and they do so in a manner that accords with our theoretical predictions. Second, we see that familiarity with exchange partners does not automatically lead to increased willingness to work things out; rather, our empirical results suggest that the impact of exchange duration on parties' willingness to resolve disputes privately is contingent on the development of norms of cooperation: in the event that such norms do not develop, the probability of a litigated outcome actually increases over time. Finally, we see that firms' willingness to work things out privately is also influenced positively by the shadow of the future. These findings are suggestive of a "discriminating alignment" between exchange characteristics and the choice of dispute resolution procedure, and they thus inject important new evidence into ongoing discussions about the legal underpinnings of different governance forms.	en_US
dc.publisher	INFORMS	en_US
dc.relation.ispartof	Organization Science	en_US
dc.relation.isbasedon	10.1287/orsc.1110.0658	en_US
dc.subject.classification	Business & Management	en_US
dc.title	Let's work it out (Or we'll see you in court...): Litigation and private dispute resolution in vertical exchange relationships	en_US
dc.type	Journal Article
utslib.citation.volume	3	en_US
utslib.citation.volume	23	en_US
utslib.for	150310 Organisation and Management Theory	en_US
utslib.for	1503 Business and Management	en_US
utslib.for	1505 Marketing	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
utslib.copyright.status	closed_access
pubs.consider-herdc	true	en_US
pubs.issue	3	en_US
pubs.volume	23	en_US

Abstract:

We examine how partners in vertical exchange relationships actually resolve disputes that are sufficiently serious to get lawyers involved. Reaching beyond the usual domain of organizational and management research, we leverage findings from law and economics to offer a novel organizational perspective on litigation and private dispute resolution, and we develop hypotheses about the likelihood of litigation in different exchange settings. Our empirical analysis generates three sets of new findings: First, counter to the received wisdom, we see that the involvement of lawyers does not necessarily signal the bitter end of an exchange relationship, because firms frequently manage to avoid litigation and resolve their disputes privately, and they do so in a manner that accords with our theoretical predictions. Second, we see that familiarity with exchange partners does not automatically lead to increased willingness to work things out; rather, our empirical results suggest that the impact of exchange duration on parties' willingness to resolve disputes privately is contingent on the development of norms of cooperation: in the event that such norms do not develop, the probability of a litigated outcome actually increases over time. Finally, we see that firms' willingness to work things out privately is also influenced positively by the shadow of the future. These findings are suggestive of a "discriminating alignment" between exchange characteristics and the choice of dispute resolution procedure, and they thus inject important new evidence into ongoing discussions about the legal underpinnings of different governance forms.

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http://hdl.handle.net/10453/18894