Transaction cost economics predicts that investments in management control will enable risky interfirm transactions. Risk is rarely eliminated, because firms trade off costs of management control and expected costs of control loss (together, the “cost of control”). The resultant solution...

There is a debate in the literature as to whether employee selection is a substitute or complement to incentive contracting. We argue that incentive contracts and selection can be both complements and substitutes conditional on the contracting difficulty faced by the firm. We examine these...