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Complexity of Outsourcing Contracts and "Ex Post" Transaction Costs: An Empirical Investigation


  • Jérôme Barthélemy
  • Bertrand V. Quélin


In this article, we use Transaction Cost Economics (TCE) and the Resource-Based View (RBV) of the firm to study outsourcing agreements. We develop an original approach of contract complexity and analyse the links among exchange hazards (i.e. specificity and environmental uncertainty), the contractual aspects of outsourcing (control, incentives, penalties, price and flexibility clauses) and the level of "ex post" transaction costs. Both contract complexity and "ex post" transaction costs are operationalized and measured. Our empirical research analyses 82 outsourcing contracts. This article uses three different dimensions (proximity to the core business, switching costs and adaptation costs) to assess the strategic importance of an outsourced activity. Our findings extend TCE's validity for the outsourcing of activities with a strategic value. Finally, this study offers an indirect measurement of "ex post" transaction costs. In short, to restrict vendor opportunism, contracts must contain incentives and penalties, as well as pricing and monitoring clauses. Copyright Blackwell Publishing Ltd 2006.

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  • Jérôme Barthélemy & Bertrand V. Quélin, 2006. "Complexity of Outsourcing Contracts and "Ex Post" Transaction Costs: An Empirical Investigation," Journal of Management Studies, Wiley Blackwell, vol. 43(8), pages 1775-1797, December.
  • Handle: RePEc:bla:jomstd:v:43:y:2006:i:8:p:1775-1797

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    References listed on IDEAS

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    2. Kathleen M. Eisenhardt & Claudia Bird Schoonhoven, 1996. "Resource-based View of Strategic Alliance Formation: Strategic and Social Effects in Entrepreneurial Firms," Organization Science, INFORMS, vol. 7(2), pages 136-150, April.
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    7. Jean-François Hennart & Dong-Jae Kim & Ming Zeng, 1998. "The Impact of Joint Venture Status on the Longevity of Japanese Stakes in U.S. Manufacturing Affiliates," Organization Science, INFORMS, vol. 9(3), pages 382-395, June.
    8. S. Trevis Certo & Richard H. Lester & Catherine M. Dalton & Dan R. Dalton, 2006. "Top Management Teams, Strategy and Financial Performance: A Meta-Analytic Examination," Journal of Management Studies, Wiley Blackwell, vol. 43(4), pages 813-839, June.
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    Cited by:

    1. Mukherjee, Debmalya & Gaur, Ajai S. & Datta, Avimanyu, 2013. "Creating value through offshore outsourcing: An integrative framework," Journal of International Management, Elsevier, vol. 19(4), pages 377-389.
    2. Benoit A. Aubert & Jean Francois Houde & Suzanne Rivard & Michel Patry, 0. "Determinants of contract completeness for information technology outsourcing," Information Technology and Management, Springer, vol. 0, pages 1-16.
    3. Gunasekaran, Angappa & Irani, Zahir & Choy, King-Lun & Filippi, Lionel & Papadopoulos, Thanos, 2015. "Performance measures and metrics in outsourcing decisions: A review for research and applications," International Journal of Production Economics, Elsevier, vol. 161(C), pages 153-166.
    4. Dorothea Alewell & Sven Hauff & Katrin Weiland & Kirsten Thommes, 2011. "HRM and the use of personnel services: an empirical analysis of German firms," International Journal of Manpower, Emerald Group Publishing, vol. 32(4), pages 394-409, July.
    5. Gregor Weber & Ruxandra Maria Mateescu & Steffen Lange & Manfred Rauch, 2016. "Knowledge Intensive Business Services (KIBS) in the Context of Changing Energy Economics in Germany," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 18(41), pages 1-89, February.
    6. repec:spr:infotm:v:18:y:2017:i:4:d:10.1007_s10799-016-0265-5 is not listed on IDEAS
    7. repec:bla:jomstd:v:54:y:2017:i:6:p:929-956 is not listed on IDEAS
    8. Kang, Min-Ping & Mahoney, Joseph T. & Tan, Danchi, 2007. "Why Firms Make Unilateral Investments Specific to Other Firms: The Case of OEM Suppliers," Working Papers 07-0110, University of Illinois at Urbana-Champaign, College of Business.
    9. Hansen, Zeynep & Higgins, Matthew, 2007. "The Effect of Contractual Complexity on Technology Sourcing Agreements," MPRA Paper 4979, University Library of Munich, Germany.
    10. Laura Poppo & Kevin Zheng Zhou, 2014. "Managing contracts for fairness in buyer–supplier exchanges," Strategic Management Journal, Wiley Blackwell, vol. 35(10), pages 1508-1527, October.
    11. Albert Plugge & Jacques Brook, 2011. "Examining the Implications of Organizational Structure Changes from a Transaction Cost Perspective: a Longitudinal Study of an Outsourcing Vendor," Working Papers 2011/12, Maastricht School of Management.
    12. Luo, Yadong & Liu, Yi & Yang, Qian & Maksimov, Vladislav & Hou, Jigang, 2015. "Improving performance and reducing cost in buyer–supplier relationships: The role of justice in curtailing opportunism," Journal of Business Research, Elsevier, vol. 68(3), pages 607-615.
    13. Huo, Baofeng & Ye, Yuxiao & Zhao, Xiande, 2015. "The impacts of trust and contracts on opportunism in the 3PL industry: The moderating role of demand uncertainty," International Journal of Production Economics, Elsevier, vol. 170(PA), pages 160-170.

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