Incentive Bargaining in Maker-Supplier Transactions and the Role of Written Contracts

Long and specific Contracts in the US and short and ambiguous contracts in Japan are a stereotypical comparison of the contracting practices in both countries. Such characteristics of written contracts are understood as sticky. Based on a semi-structured interview of Japanese auto and electronics industries, this article demonstrates such understandings are not necessarily erroneous but superficial. If one closely examines individual contractual provisions, one will find out that they can be divided into three categories and that the “contingent contracts” and the “prerequisite environment contracts” are specific and enforceable in both countries, but the “procedural environment contracts” are written in various ways. Although it is true that master contracts are stickier compared to the rapidly changing deal structures, their substance is actually changing gradually. The reasons for the stickiness of the master contracts such as the cost of multilateral negotiations and the problem of internal bargaining are shared by both countries