Reflections on the 2016 Nobel Memorial Prize for contract theory (Oliver Hart and Bengt Holmström)

Nicolai J. Foss; Peter G. Klein

doi:10.23941/ejpe.v9i2.234

Nicolai J. Foss Bocconi University
Peter G. Klein Baylor University

DOI: https://doi.org/10.23941/ejpe.v9i2.234

Keywords: Nicolai J. Foss, Peter G. Klein, Oliver Hart, Bengt Holmstrom, Nobel, economics

Abstract

We briefly summarize the contributions of Oliver Hart and Bengt Holmström, two key founders of modern contract theory, and describe their significance for the analysis of organizations and institutions. We then discuss the foundations of modern contract theory and review some criticisms related to modeling strategy, assumptions about knowledge and cognition, and relevance. We conclude with some suggestions for advancing contract theory in a world of uncertainty, complexity, and entrepreneurship.

Author Biographies

Nicolai J. Foss, Bocconi University

Nicolai J. Foss is professor of organization theory at Bocconi University, Milano. His research focuses on organization design issues in strategic management and entrepreneurship theory. Foss is a member of Academia Europaea.

Peter G. Klein, Baylor University

Peter G. Klein is professor of entrepreneurship at Baylor University’s Hankamer School of Business, adjunct professor of strategy and management at the Norwegian School of Economics, and Carl Menger Research Fellow at the Mises Institute. His research focuses on the links between entrepreneurship, strategy, and organization, with application to innovation, diversification, vertical coordination, health care, and public policy.