There is an old joke among academic lawyers that goes something like this: when a legal scholar needs economics, he adds a co-author; when an economist needs law, she buys a lawyer lunch. The grain of truth is that academic economists often treat academic lawyers badly. Not that we don't sometimes deserve it ... but now is as good a time as any for some payback.

I take some inspiration here from Kate Litvak, who at the recent conference on Venture Capital After the Bubble excoriated several financial economists for misreading venture capital fund agreements. I have had similar experiences with financial economists misreading venture capital investment agreements, so her complaints rang true. The root problem is that economists are more concerned with aggregation than nuance, but nuance is critical to contract interpretation.

Another example of this arose yesterday, as I was writing my paper on strategic alliances for Larry Ribstein's Uncorporation Conference. As lawyers are wont to do, I decided to offer a description of "strategic alliances" so that people who are new to the area could have some idea what kind of relationships I am discussing. The definition does not need to be too precise, as it has no legal significance (we do not regulate strategic alliances any differently than other long-term contractual relationships), but I am looking for something that will show the distinctiveness of strategic alliances.

As is often the case, the economists have beaten us to the punch and have been studying strategic alliances for some time now, so I decided to review the economics literature for some guidance. Here are two offerings:

* “A strategic alliance is an agreement between legally distinct entities that provides for the sharing of costs and benefits of some (significantly costly) mutually beneficial activity.”

* A strategic alliance is an arrangement "whereby two or more firms agree to pool their resources to pursue specific market opportunities."

Other definitions exist, all equally unhelpful. I am not saying that this is easy; I am struggling right now to come up with my own definition that is more useful than these. But the problem should be obvious: other than indicating that strategic alliances are contracts between firms (rather than individuals), these definitions do almost nothing to limit the field.

Oliver Williamson grabbed the study of contract structure from Ian Macneil in the early 1970s, and lawyers have not seen much of it since. Sure, we still have symposia about relational contracting, but lawyers are too attached to judge-made law. We have largely forgotten to study contract structure, ceding that to financial economists. Unfortunately, our experience in venture capital studies has shown that we cannot trust the economists to do it right. My immediate research agenda, therefore, is designed to take back some of the lost ground.

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