Collaborative Contracting in Inter-Firm Relationships
Year: 2010
Type: preprint
Abstract: This study uses insights from agency theory and transaction cost economics to posit that uncertainty arising from either the nature of the task or from the demand environment is associated with collaborative inter-firm contracting. Task and demand uncertainty increase the influence of uncontrollable factors on performance, thereby making expected performance difficult to determine and increasing the noise in performance measures. This decreases the ability of firms to use performance measures for control purposes, leading to greater contractual incompleteness and increased risk of opportunistic behavior by the contracting parties. We posit that firms protect themselves from opportunism by making greater use of collaborative contracting. Empirical analyses using data from 87 contracts between a leading supplier of electronics manufacturing services and its customers indicate that both task and demand uncertainty are associated with greater use of collaborative contracting. Our study suggests that task and demand uncertainty have implications for the design of contracts between firms.
Source: SSRN Electronic Journal
Language: English
Subfield: Management Information Systems
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2209616395