We continue our analyses and determine whether our antecedents have significant relationships with the different contract functions. Three findings are worthwhile highlighting. First of all, Table 6 shows that the overall construct for alliance contracts masks the true influence of dedicated assets. Dedicated assets is an important determinant for safeguarding contracts (Model 2; [beta] = 0.18, p <0.01). The disaggregate analysis thus suggests that firms use more safeguarding provisions in their contract as asset specificity increases.

The presence of dedicated assets has no impact on use of the contract for the coordination of the alliance activities or for the safeguarding of external contingencies. Likewise, Table 6 reports that spillover risks increase the number of safeguarding clauses in an alliance contract (Model 2; [beta] = 0.16, p <0.01) as well as the number of clauses that address external contingencies (Model 4; [beta] = 0.17, p <0.01). In other words, the greater the risks of spill-over, the more the alliance partners discuss and agree upon clauses that aim to reduce these risks.

Secondly, the disaggregate analysis identifies an important and significant role for interorganizational trust. Specifically, interorganizational trust between alliance partners lead them to specify fewer provisions relating to the coordination of the alliance and showing commitment (Model 3; [beta] = -0.11, p < 0.01). Trust has no impact on the number of safeguarding provisions that firms include in the contract. This is an interesting finding and partly confirms Williamson's (1985) view on the limits of trust for interfirm organization. It replaces 'weaker' provisions but not the safeguarding clauses. Interorganizational trust helps alliance partners to e.g. improve the understanding of each others' business cultures and habits and to improve mutual communication but, surprisingly, this does not materialize in the management of risks. In other words, interfirm governance of high-tech innovation activities may benefit from trust but cannot do without formal agreements.

Thirdly, Table 6 shows that each group of contract clauses has unique determinants.

When we group the significant antecedents we find explanations for each peculiar function of a contract. In a first situation, represented by Model 2, we find that a high-tech alliance with a large firm that executes a strategically important project--including substantial dedicated assets and spillover risks--will discuss and subsequently include many safeguarding provisions in the formal agreement. In a second situation, represented by Model 3, we find that a high-tech alliance with a large firm that is risk-averse and that operates a complex project will review and include co-ordination and commitment provisions. At the same time, these alliances will benefit from interorganizational trust. In a third situation, represented by Model 4, we find that a high-tech alliance with a large and risk-averse firm that operates a complex and strategically important project--including spillover risks--will have many debates on unforeseeable contingencies. They include these provisions in the contract.

5. APPRAISAL

5.1 Implications for managers

The present study has important implications for alliance managers who are, or soon will be, involved in a strategic (high-tech) alliance. First, our study informs alliance managers on the content of an interfirm contract. Business relationships in high-tech industries may offer substantial future benefits. Turnover and net profits can grow for many years in succession if companies join forces and manage to introduce new products in global consumer markets.

However, many of these high-tech alliances fail, because of, among other things, ambiguity on agreements. That is, disappointing alliance performance is often not only due to the lack of crystal clear agreements on e.g. goals, investments and communication, but also because these agreements are not specified in a formal contract. Oftentimes alliance managers are informed by their company lawyers who tend to focus on safeguarding risks and spill-over.

Our clauses provide an overview of alliance issues that go beyond that. These clauses derive from business practice. Our study confirms the relative importance of each of these in a large scale sample of 391 high-tech alliances and by doing so, offers a best-practice situation. This is helpful for large companies that either have contract expertise in-house or have the financial resources to hire outside legal support. Our clauses offer an opportunity to crossvalidate the content of their (standard) contracts. For small and medium sized enterprises they offer a point of departure should they not have contract expertise and/or a benchmark opportunity for existing contracts.

Second, our study shows alliance managers that contracts are important not only when things go wrong, but also in the development and management of the relationship. Managers need to be aware of the different functions of a contract. It is not just a legal document that others can take care off. On the contrary, it is one of the most essential parts of the relationship, with different stages and, similar like trust, one that can make or break the interfirm alliance. The three functions that we identified in this study can be envisaged as a reflection of the process of negotiation and the stages of commitment that the parties go through. The concerns of safeguarding risks and spill-over may play a particularly prominent role when entering an agreement. The coordination and commitment function is not concerned with opportunism but is designed to coordinate the often complex tasks undertaken in interorganizational alliances and to show loyalty to the alliance. The final function of safeguarding external contingencies is also unconcerned with any direct fear of opportunism.

Although not implemented naively, its function is to safeguard the parties from that which might occur if the relationship or its context changes over time. Thus, in line with the findings of our study we suggest that the process of collaboration plays a central role in the design and implementation of a formal contract. It is not the mere presence or the absence of contracts, or their eventual detail that are the only issues. Instead, the focus should be on the aim and content of the contract and the atmosphere in which it is set out.

Third, we suggest that alliance managers self rather than company or outside lawyers need to design and manage the interfirm contract. Lawyers are not the most appropriate parties for alliance contracts because they have a biased focus--i.e. only safeguarding positions--and often perceive alliance contracts as one-shot documents designed at the start of the relationship (note that alliance managers need to avoid this pitfall themselves as well).

Lawyers and alliance managers can break trust by putting too much emphasis on the wrong issues at the wrong time. Alliance managers of an interfirm collaboration can make contracts subject of discussion by emphasizing that different phases of the relationship require different items to be dealt with. Thus, the meaning of a contract generally changes over time (cf. Nooteboom 2002). If we consider the development of a relationship as a process in which positive and negative behaviour can change the relationship atmosphere--as suggested in the literature by Zand (1972) and Deutsch (1973)--the writing and signing of a contract should also be envisaged as a step in this development. Contracts can, just like trust, be seen as both a cause and result of cooperation. Negotiating the contract can be seen as a process of getting to know and understand each other. Signing the contract can be seen as an act of commitment.

Alliance managers can monitor this ongoing process of contracting by, for instance, categorizing and timely discussing particular sets of clauses so that they are addressed in the appropriate negotiating atmosphere.

5.2 Limitations and future research

We emphasize that improvements could and should be made in future empirical research that aims to understand the role and content of contracts behaviour in the management of (high tech) interfirm alliances. Some of the limitations of our research are generic, and have also been identified in other, related organization research. We collected cross-sectional data from business relationships in high-tech alliances in the Netherlands. The data concern alliances between Dutch companies. Their contracting behaviour will thus reflect the Dutch (or broader continental European) culture in which 'voice' is the prevalent option for solving problems and cases are seldom taken to court (cf. Bachmann 1998). This choice limits the ability to generalize from our results. Also, we interviewed one respondent for each interfirm collaboration. Although our respondents were the best-informed parties because they were the managers of the business relationship, this means we did not explore other angles of the relationship from the perspective of the focal firm or the partner firm. A final limitation concerns the dynamic nature of contracting behaviour versus the analysis thereof using crosssectional databases.

Taking these limitations into account, we envisage the following opportunities for future research into alliance contracts. First, given the lack of empirical research on contracts, any new sample would add to our understanding of this important phenomenon. A crossvalidation of our key findings with data from Anglo-Saxon countries such as the United Kingdom or the United States would provide opportunities for analysing the effects of institutions on the role and content of formal contracts. New data from Dutch high-tech alliances would allow to test whether contract functions in the same sector and country change over time. In line with this, future research may also analyse whether and under what conditions contracts are actually used to manage interfirm alliances.

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