THE FIRM AS A MULTICONTRACT ORGANIZATION

The firm is often considered as a nexus of contracts linking the manag ement and its different stakeholders: claimholders, workers, unions, c ustomers, suppliers, and the state, among others. This paper surveys r ecent work in contract theory, the multiprincipal incentive theory, an d the theory of side contracts, which provides some insights into the structure of those contracts and therefore into the structure of the f irm. First, we discuss the incomplete contracting assumptions underlyi ng these variations of the usual grand contract approach. Second, we e xplain how the theoretical lessons learned from this work-the distribu tion of contracting rights, the power of incentive schemes within orga nizations, and the design of communication channels-apply to the theor y of the firm.