Dealing with Business Service Transactions after the Sourcing Decision: Influence of Contract and Uncertainty
Business companies are increasingly dealing with external sourcing agents in today’s marketplace. However, few research studies have investigated how purchased business services should be governed after the sourcing decision, during the interaction between buyer and seller. In this study, we investigate business service exchange governance, both contractual and relational, after the purchase decision and taking into account the impact of asset specificity and uncertainty. The results reveal that contracts should not just be used to establish business relationships as these formal agreements do impact business services exchanges after the sourcing decision. The two components of contractual governance, specificity and flexibility, each have a distinct impact on business services exchanges, indicating that both need to be developed carefully when drafting a contract. Though formal agreements influence business service exchange governance in the life after the purchase, informal mechanisms such as relational governance should not be overlooked. The relational norms developed during the buyer-seller interaction complement the contractual arrangements made. In business services settings, governance mechanisms are more strongly determined by uncertainty related to behavioral than to environmental aspects. Specific investments of the buyer are reflected in the informal governance aspects of the relationship, while specific investments made by the supplier are also safeguarded by contractual arrangements. Based on the results, an integrated governance scheme for business services transactions is developed.
|Date of creation:||Jan 2007|
|Contact details of provider:|| Postal: Hoveniersberg 4, B-9000 Gent|
Phone: ++ 32 (0) 9 264 34 61
Fax: ++ 32 (0) 9 264 35 92
Web page: http://www.ugent.be/eb
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Brown, James R. & Cobb, Anthony T. & Lusch, Robert F., 2006. "The roles played by interorganizational contracts and justice in marketing channel relationships," Journal of Business Research, Elsevier, vol. 59(2), pages 166-175, February.
- Keith D. Brouthers & Lance Eliot Brouthers, 2003. "Why Service and Manufacturing Entry Mode Choices Differ: The Influence of Transaction Cost Factors, Risk and Trust," Journal of Management Studies, Wiley Blackwell, vol. 40(5), pages 1179-1204, 07.
- N. Sheth, Jagdish & Parvatiyar, Atul, 1995. "Relationship marketing," International Business Review, Elsevier, vol. 4(4), pages 391-396.
- Williamson, Oliver E, 1983. "Credible Commitments: Using Hostages to Support Exchange," American Economic Review, American Economic Association, vol. 73(4), pages 519-540, September.
- David A Griffith & Matthew B Myers, 2005. "The performance implications of strategic fit of relational norm governance strategies in global supply chain relationships," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 36(3), pages 254-269, May.
- Joskow, Paul L, 1987. "Contract Duration and Relationship-Specific Investments: Empirical Evidence from Coal Markets," American Economic Review, American Economic Association, vol. 77(1), pages 168-185, March.
- C Zhang & S T Cavusgil & A S Roath, 2003. "Manufacturer governance of foreign distributor relationships: do relational norms enhance competitiveness in the export market?," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 34(6), pages 550-566, November.
- Buvik, Arnt & Grønhaug, Kjell, 2000. "Inter-firm dependence, environmental uncertainty and vertical co-ordination in industrial buyer-seller relationships," Omega, Elsevier, vol. 28(4), pages 445-454, August.
- Pierpaolo Battigalli & Giovanni Maggi, 2002. "Rigidity, Discretion, and the Costs of Writing Contracts," American Economic Review, American Economic Association, vol. 92(4), pages 798-817, September.
- Sergio G. Lazzarini, 2004. "Order with Some Law: Complementarity versus Substitution of Formal and Informal Arrangements," Journal of Law, Economics and Organization, Oxford University Press, vol. 20(2), pages 261-298, October.
- Pilling, Bruce K. & Crosby, Lawrence A. & Jackson, Donald Jr., 1994. "Relational bonds in industrial exchange: An experimental test of the transaction cost economic framework," Journal of Business Research, Elsevier, vol. 30(3), pages 237-251, July.
- Gao, Tao & Sirgy, M. Joseph & Bird, Monroe M., 2005. "Reducing buyer decision-making uncertainty in organizational purchasing: can supplier trust, commitment, and dependence help?," Journal of Business Research, Elsevier, vol. 58(4), pages 397-405, April.
When requesting a correction, please mention this item's handle: RePEc:rug:rugwps:07/432. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Nathalie Verhaeghe)
If references are entirely missing, you can add them using this form.