Resource dependence, alternative supply sources, and the design of formal contracts

Deanna Malatesta, Craig R. Smith

Research output: Contribution to journalArticle

18 Scopus citations

Abstract

Employing a resource dependence theoretical framework, the authors analyze a set of recently awarded contracts between the Environmental Protection Agency and its suppliers to determine how joint dependence, supplier dependence, and government dependence affect contract design-specifically, the decision to use a cost-plus (flexible) contract. Findings provide evidence that organizations choose contract designs that will reduce uncertainty related to securing critical resources. However, different dimensions of dependence have different effects: (1) higher levels of joint dependence lead to more flexible governance forms; (2) the lack of alternative suppliers is a more important factor than high levels of financial dependence; and (3) the parties involved in government procurement are likely to perceive government as a unique type of organization, which, in turn, has implications for contract design choices. The authors conclude with managerial strategies for restructuring power/dependence relationships to achieve the contract design most likely to yield a surplus in the exchange.

Original languageEnglish (US)
Pages (from-to)608-617
Number of pages10
JournalPublic Administration Review
Volume71
Issue number4
DOIs
StatePublished - Jul 1 2011

ASJC Scopus subject areas

  • Sociology and Political Science
  • Public Administration
  • Marketing

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