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Complexity and the Cognitive Load of R&D "Alliance" Contracts: an Experimental Study

Event details of January 14, 2008: John Hagedoorn (University of Maastricht)
Date 14 January 2008
Time 11:45 -13:15


In this paper we offer a new perspective on measuring the complexity of inter-firm contracts. We define complex contracts as those contracts that contain many elements (clauses, provisions, enforcement mechanisms) with a relatively large number of interdependencies that also impose a significant cognitive load upon contract parties. Previous studies on contractual complexity employ objective measures such as the number of pages, the amount of kilobytes or the number of provisions to measure this complexity. Following some suggestions in the literature, we argue that the degree to which a contract imposes a significant cognitive load upon contract parties should be taken as another important dimension of contractual complexity. We develop a model of the complexity of
contracts using a multidimensional perspective where both objective and subjective dimensions are taken into account. Our empirical analysis combines a sample of nearly 400 R&D alliance contracts in the biopharmaceutical industry with an experiment, where we measure the perception and assessment of the cognitive load of these contracts. Our
findings show that quantitative, objective measures of complexity, such as length, and objective as well as subjective elements of the cognitive load of contracts, i.e. the information processing effort that contractual parties have to make, do indeed measure different aspects of
contractual complexity.


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