Transformation Cost Engineering

Transactions in the market for corporate control are not fully standardized but rather exhibit a material amount of variation. This paper explores a possible structural explanation: That the complexity of merger and acquisition (M&A) agreements makes them susceptible to multiple sources of path dependency, which introduce tensions that unsettle incentives toward uniform standardization. Using natural language processing techniques and standard regression analysis, the article presents preliminary evidence indicating that the level of standardization of various M&A agreement provisions correlates differently with multiple sources of path dependency, lending support to the hypothesis that endogenous structural factors limit the standardization of M&A transactions. Those findings underscore the importance of including scope economies in theories of contractual innovation and enforcement and emphasize the role of transaction designers’ organizational routines as a source of market resilience