Social Capital and Contract Duration in Buyer-Supplier Networks for Information Technology Outsourcing
نویسندگان
چکیده
This paper presents new evidence on the role of embeddedness in predicting contract duration in the context of Information Technology (IT) Outsourcing. Contract duration is a strategic decision that aligns interests of clients and vendors, providing the benefits of business continuity to clients and incentives to undertake relationship specific investments for vendors. Considering the salience of this phenomenon, there has been limited empirical scrutiny into how contract duration is awarded. We posit that clients and vendors obtain two benefits from being embedded in an inter-organizational network. First, the learning and experience accumulated from being embedded in client-vendor network could mitigate the challenges in managing longer-term contracts. Second, the network serves as a reputation system that can stratify vendors according to their trustworthiness and reliability, which is important in longer-term arrangements. In particular, we attempt to make a substantive contribution in theorizing about embeddedness at four distinct levels: structural embeddedness at the node level, relational embeddedness at the dyad level, contractual embeddedness at the level of a neighborhood of contracts and finally, positional embeddedness at the level of the entire network. We analyze a dataset of 22039 outsourcing contracts implemented between 1989 and 2008. We find that contract duration is indeed associated with structural and positional embeddedness of participant firms, with the relational embeddedness of the buyer-seller dyad and with the duration of other contracts to which it is connected through common firms. Given the nature of our data, identification using traditional OLS based approaches is difficult given the unobserved errors being clustered along two non-nested dimensions and the autocorrelation in a firm’s decision (here the contract) with those of contracts in its reference group. We employ a multi-way cluster robust estimation and a network auto-regressive estimation to address these issues. Implications for literature and practice are discussed.
منابع مشابه
Social Capital, Reputation and Contract Design in Buyer-Supplier Networks
Prior research on inter-firm contracting has identified the ideal governance mode to be either Formal‟ or „Relational‟ governance modes. However, both streams of literature rely on stringent assumptions about the cost of breaching contractual obligations and the mechanism of enforcement. We propose an embeddedness-based governance logic by examining an inter-organizational network of exchange p...
متن کاملSuccess of IT Outsourcing contracts: Effects of the Complexity of the Activity, Relational Governance and Structure of Incentives
The outsourcing of Information Technology (IT) services is a practice generally regulated by contracts. Since contracts are inevitably incomplete, buyer-supplier relationships are usually managed by additional mechanisms of incentives and governance, which results in a variety of success levels. Buyer perceived volatility and ambiguity of the future relationship are argued to be keys in definin...
متن کاملOutsourcing and Optimal Trade Policy
Outsourcing under incomplete contracts tends to generate too little investment that is specific to the bilateral relationship. In a model where there are otherwise no social motives for protection, we show that protection is helpful when the buyer trades customized inputs with a specialized domestic supplier while also buying standardized inputs from the world market. In that case, a tariff wor...
متن کاملSocial Networks and Contract Enforcement in IT Outsourcing
Most prior research on Information Technology Outsourcing(ITO) has characterized the dominant governance modes as either ‘Formal’ or ‘Relational,’ which rely on stringent assumptions of perfect foresight or about the extent to which one party can punish unilateral deviations by the other. We propose a third alternative in addition to dyadic measures of inter-firm reputation. The reputation of a...
متن کاملProviding a Model for Financing the Buyer and Supplier in the Supply Chain of Mehrvarzan Healthcare Products Distributor
The present study aims to provide a model for financing buyer-supplier in Mehrvarzan healthcare Company. The statistical population of the study includes 300 employees of the company. According to Morgan table, 168 people are selected as the statistical sample. Available non-random sampling method has been used. For collecting the required information, the standard buyer-supplier financing ques...
متن کاملذخیره در منابع من
با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید
عنوان ژورنال:
- Information Systems Research
دوره 26 شماره
صفحات -
تاریخ انتشار 2015