Journal article
Relationships and Hybrid Contracts: An Analysis of Contract Choice in Information Technology
Journal of law, economics, & organization, Vol.20(1), pp.207-229
04/01/2004
DOI: 10.1093/jleo/20.1.207
Abstract
Selecting the type of contract is an important aspect of governing interfirm transactions. The purpose of this article is to examine the use of fixed-fee and time-and-materials (T&M, or cost-plus) contracts and a hybrid contract that consists of a T&M contract with a cap. In addition to uncertainty and measurement factors, we also address a relatively unexplored aspect of contracting—how the prior relationship between the firms influences the type of contract the firms select. Using data on 394 contracts from the information technology (IT) services industry, we show that T&M contracts are preferred when the cost of measuring quality ex post is high and when it is difficult to estimate costs ex ante. We also find site-specific measures of relationship lead to a preference for low-powered T&M contracts.
Details
- Title: Subtitle
- Relationships and Hybrid Contracts: An Analysis of Contract Choice in Information Technology
- Creators
- Arturs KalninsKyle J Mayer
- Resource Type
- Journal article
- Publication Details
- Journal of law, economics, & organization, Vol.20(1), pp.207-229
- DOI
- 10.1093/jleo/20.1.207
- ISSN
- 1465-7341
- eISSN
- 1465-7341
- Language
- English
- Date published
- 04/01/2004
- Academic Unit
- Management and Entrepreneurship
- Record Identifier
- 9984083262902771
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