Behind every partnership lurks an “incomplete contract” — a concept for which Harvard’s Oliver Hart just earned a Nobel prize in economics with MIT’s Bengt Holmstrom, who worked on related topics. This Nobel is the third to go to scholars working on what economists today call contract theory. The late Ronald Coase, the grandfather of the field, and UC Berkeley’s Oliver Williamson have already received Nobel prizes in economics for this line of thinking.
The school of thought has tremendous implications for how businesses are organized. I’ll focus here on the implications for business partnerships: joint ventures, alliances, supplier relationships, and channel partnerships.
