Exploring the role of learning in contract design: Empirical evidence using buyer-supplier IT services contracts

The objective of this dissertation is to explore whether contractual experience can improve a firm's ability to write more effective contracts. Using a longitudinal dataset consisting of 352 contracts written by Compustar, a supplier of information technology (IT) services with a set of 140 buyers over a period of 12 years, I examine learning in the selection of the type of contract and in two types of contractual provisions, contingency planning and task description. Adopting a split-sample design, I compare the way Compustar crafted its contracts when it first started offering IT services and later on, after the company had acquired more experience in crafting IT services contracts. The analysis reveals changes over time in the way Compustar designs its contracts that cannot be accounted for by changes in the attributes of the transactions. These findings, I argue, reflect learning processes at the organizational level with respect to the effective management of interfirm exchange.