TY  - JOUR
AU  - Baker,George
AU  - Gibbons,Robert
AU  - Murphy,Kevin J.
TI  - Implicit Contracts and the Theory of the Firm
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6177
PY  - 1997
Y2  - September 1997
UR  - http://www.nber.org/papers/w6177
L1  - http://www.nber.org/papers/w6177.pdf
N1  - Author contact info:
George Baker
Harvard Business School
Morgan Hall 440
Boston, MA 02163
Tel: 617/495-6119
Fax: 617/496-4191
E-Mail: gbaker@hbs.edu

Robert S. Gibbons
MIT Sloan School of Management
100 Main Street, E62-524
Cambridge, MA  02142
Tel: 617/253-0283
Fax: 617/253-2660
E-Mail: rgibbons@mit.edu

Kevin M. Murphy
Booth School of Business
The University of Chicago
5807 S. Woodlawn Ave.
Chicago, IL  60637
Tel: 773/702-7280
Fax: 773/834-3554
E-Mail: murphy@chicagoBooth.edu
AB  - We analyze the role of  implicit contracts' (that is, informal agreements supported by" reputation rather than law) both within firms, for example in employment relationships between them, for example as hand-in-glove supplier relationships. We find that the optimal" organizational form is determined largely by what implicit contracts it facilitates.  Among other" things, we also show that vertical integration is an efficient response to widely varying supply" prices.  Finally, our model suggests why  management' (that is, the development and" implementation of unwritten rules and codes of conduct) is essential in organizations.  "
ER  -