Contract specificity and its performance implications

Erik A. Mooi, Mrinal G Ghosh

Research output: Contribution to journalArticle

80 Citations (Scopus)

Abstract

Governance theories, such as transaction cost economics, argue that systematic deviations from an attributegovernance alignment should influence performance. This article investigates the performance implications of contract specificity for the procurement of information technology products. The authors argue that parties choose a level of contract specificity that economizes on both the ex ante contracting costs and the ex post transaction costs and that deviations between the observed and the predicted levels of contract specificity are an important determinant of these transaction costs. The authors test the hypotheses using a comprehensive archival data set of information technology transactions and employ a two-step estimation procedure. First, they estimate the "predicted" level of contract specificity, which accounts for key transactional attributes. Second, they study the consequences of deviating from this predicted level of contractual specificity. The results provide the first explicit demonstration of the trade-off between ex ante contracting costs and ex post transaction problems and suggest that parties need to economize jointly on these costs when choosing the governance form

Original languageEnglish (US)
Pages (from-to)105-120
Number of pages16
JournalJournal of Marketing
Volume74
Issue number2
DOIs
StatePublished - Mar 2010

Fingerprint

Specificity
Costs
Contracting
Transaction costs
Deviation
Transaction cost economics
Two-step estimation
Governance form
Trade-offs
Governance theory
Alignment
Procurement

Keywords

  • Business-to-business marketing
  • Contracts
  • Relationship marketing
  • Transaction cost economics

ASJC Scopus subject areas

  • Business and International Management
  • Economics and Econometrics
  • Marketing

Cite this

Contract specificity and its performance implications. / Mooi, Erik A.; Ghosh, Mrinal G.

In: Journal of Marketing, Vol. 74, No. 2, 03.2010, p. 105-120.

Research output: Contribution to journalArticle

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