Journal ArticleDOI
Research Note---On Vendor Preferences for Contract Types in Offshore Software Projects: The Case of Fixed Price vs. Time and Materials Contracts
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The hypothesis is that the vendor's ability leverage information asymmetry about capabilities and experiences translates into the vendor preferring FP contract to secure larger information rents, and the results support this hypothesis and suggest that the Vendor would prefer the FP contract for larger and longer projects with larger teams.Abstract:
Prior research has indicated that, on average, offshore vendors have higher profits associated with time and materials (T&M) contracts than fixed price (FP) contracts. This research raises two questions. First, Is the relative importance of various profit drivers different across two contractual regimes? Second, Does it follow that vendors unconditionally prefer T&M contracts for all projects? We address these questions by using data on 93 offshore projects completed by a leading Indian vendor. We use an endogenous switching regression framework and the program evaluation methodology to show that profit equations are distinctly different for the two contractual regimes. Using these two profit equations, we also identify contingencies under which the vendor prefers an FP contract to a T&M contract. We hypothesize that the vendor's ability leverage information asymmetry about capabilities and experiences translates into the vendor preferring FP contract to secure larger information rents. Our results support this hypothesis and suggest that the vendor would prefer the FP contract for larger and longer projects with larger teams. However, vendors would prefer a T&M contract when the risk of employee attrition from the project team is high. In addition, we discuss managerial implications of these results in the paper.read more
Citations
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Impact of Performance-Based Contracting on Product Reliability: An Empirical Analysis
TL;DR: A two-stage econometric model is built that explicitly accounts for the endogeneity of contract choices, and evidence of a positive and significant effect of PBC on product reliability is found.
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A Process Model of Complementarity and Substitution of Contractual and Relational Governance in IS Outsourcing
TL;DR: This study challenges the prevailing view of an either/or dichotomy of complementarity and substitution by showing that they are causally connected over time.
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Information technology outsourcing, knowledge transfer, and firm productivity: an empirical analysis
Young Bong Chang,Vijay Gurbaxani +1 more
TL;DR: It is demonstrated that IT outsourcing does lead to productivity gains for firms that select this mode of service delivery and that IT-related knowledge held by IT services vendors enables these productivity gains, the magnitude of which is moderated by a firm's IT intensity.
Journal ArticleDOI
Contract Performance in Offshore Systems Development: Role of Control Mechanisms
TL;DR: The study theoretically as well as empirically establishes the need for conceptualizing mechanistic governance as a viable and significant governance mechanism for offshore ISD contracts and provides insights to managers on having well-specified contracts and acknowledging the role of mechanistic Governance for better performance.
Journal ArticleDOI
The asymmetric benefits of relational flexibility: evidence from software development outsourcing
Anandasivam Gopal,Balaji R. Koka +1 more
TL;DR: Evidence for the asymmetric benefits from relational governance is provided, thereby arguing for a more contingent and limited view of the value of relational governance, based on risk-exposure, rather than the more expansive view prevalent in the literature contending that relational governance provides benefits for all parties to an exchange.
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