This study highlights the role of nitrogen vacancies and defect structures in engineering hard coatings with enhanced phase stability and mechanical properties for high temperature applications. Titanium aluminum nitride (Ti,Al)N based materials in the form of thin coatings has remained as an outstanding choice for protection of metal cutting tools due to its superior oxidation resistance and high-temperature wear resistance. High-temperature spinodal decomposition of metastable (Ti,Al)N into coherent c-TiN and c-AlN nm-sized domains results in high hardness at elevated temperatures. Even higher thermal input leads to transformation of c-AlN to w-AlN, which is detrimental to the mechanical properties of the coating. One mean to delay this transformation is to introduce nitrogen vacancies. In this thesis, I show that by combining a reduction of the overall N-content of the c-(Ti,Al)Ny (y < 1) coating with a low substrate bias voltage during cathodic arc deposition an even more pronounced delay of the c-AlN to w-AlN phase transformation is achieved. Under such condition, age hardening is retained until 1100 ?C, which is the highest temperature reported for (Ti,Al)N films. During cutting operations, the wear mechanism of the cathodicarc-deposited c-(Ti0.52Al0.48)Ny with N-contents of y = 0.92, 0.87, and 0.75 films are influenced by the interplay of nitrogen vacancies, microstructure, and chemical reactions with the workpiece material. The y = 0.75 coating contains the highest number of macroparticles and has an inhomogeneous microstructure after machining, which lower its flank and crater wear resistance. Age hardening of the y = 0.92 sample causes its superior flank wear resistance while the dense structure of the y = 0.87 sample prevents chemical wear that results in excellent crater wear resistance. Heteroepitaxial c-(Ti1-x,Alx)Ny (y = 0.92, 0.79, and0.67) films were grown on MgO(001) and (111) substrates using magnetron putter deposition to examine the details of their defect structures during spinodal decomposition. At 900 ?C, the films decompose to form coherent c-AlN- and c-TiN- rich domains with elongated shape along the elastically soft <001> direction. Deformation maps show that most strains occur near the interface of the segregated domains and inside the c-TiN domains. Dislocations favorably aggregate in c-TiN rather than c-AlN because the later has stronger directionality of covalent chemical bonds. At elevated temperature, the domain size of (001) and (111)- oriented c-(Ti,Al)Ny films increases with the nitrogen content. This indicates that there is a delay in coarsening due to the presence of more N vacancies in the film. The structural and functional properties (Ti1-x,Alx)Ny are also influenced by its Al content (x). TiN and (Ti1-x,Alx)Ny (y = 1, x = 0.63 and x = 0.77) thin films were grown on MgO(111) substrates using magnetron sputtering technique. Both TiN and Ti0.27Al0.63N films are single crystals with cubic structure. (Ti0.23,Al0.77)N film has epitaxial cubic structure only in the first few atomic layers then it transitions to an epitaxial wurtzite layer, with an orientation relationship of c-(Ti0.23,Al0.77)N(111)[1-10]??w-(Ti0.23,Al0.77)N(0001)[11-20]. The w-(Ti0.23,Al0.77)N shows phase separation of coherent nm-sized domains with varying chemical composition during growth. After annealing at high temperature, the domains in w-(Ti0.23,Al0.77)N have coarsened. The domains in w-(Ti0.23,Al0.77)N are smaller compared to the domains in c-(Ti0.27,Al0.63)N film that has undergone spinodal decomposition. The results that emerged from this thesis are of great importance in the cutting tool industry and also in the microelectronics industry, because the layers examined have properties that are well suited for diffusion barriers.