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- Publisher Website: 10.1287/isre.1080.0204
- Scopus: eid_2-s2.0-77954300639
- WOS: WOS:000276082100003
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Article: Contractual provisions to mitigate holdup: Evidence from information technology outsourcing
Title | Contractual provisions to mitigate holdup: Evidence from information technology outsourcing |
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Authors | |
Keywords | Contract duration Incomplete contracts Holdup Extendibility clauses Underinvestment Information technology outsourcing |
Issue Date | 2010 |
Citation | Information Systems Research, 2010, v. 21, n. 1, p. 37-55 How to Cite? |
Abstract | The complexity and scope of outsourced information technology (IT) demands relationship-specific invest-Tments from vendors, which, when combined with contract incompleteness, may result in underinvestment and inefficient bargaining, referred to as the holdup problem. Using a unique data set of over 100 IT outsourcing contracts, we examine whether contract extensiveness, i.e., the extent to which firms and vendors can foresee contingencies when designing contracts for outsourced IT services, can alleviate holdup. While extensively detailed contracts are likely to include a greater breadth of activities outsourced to a vendor, task complexity makes it difficult to draft extensive contracts. Furthermore, extensive contracts may still be incomplete with respect to enforcement. We then examine the role of nonprice contractual provisions, contract duration, and extendibility terms, which give firms an option to extend the contract to limit the likelihood of holdup. We also validate the ex post efficiency of contract design choices by examining renewals of contracting agreements. © 2010 INFORMS. |
Persistent Identifier | http://hdl.handle.net/10722/244106 |
ISSN | 2023 Impact Factor: 5.0 2023 SCImago Journal Rankings: 4.176 |
ISI Accession Number ID |
DC Field | Value | Language |
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dc.contributor.author | Susarla, Anjana | - |
dc.contributor.author | Subramanyam, Ramanath | - |
dc.contributor.author | Karhade, Prasanna | - |
dc.date.accessioned | 2017-08-31T08:56:04Z | - |
dc.date.available | 2017-08-31T08:56:04Z | - |
dc.date.issued | 2010 | - |
dc.identifier.citation | Information Systems Research, 2010, v. 21, n. 1, p. 37-55 | - |
dc.identifier.issn | 1047-7047 | - |
dc.identifier.uri | http://hdl.handle.net/10722/244106 | - |
dc.description.abstract | The complexity and scope of outsourced information technology (IT) demands relationship-specific invest-Tments from vendors, which, when combined with contract incompleteness, may result in underinvestment and inefficient bargaining, referred to as the holdup problem. Using a unique data set of over 100 IT outsourcing contracts, we examine whether contract extensiveness, i.e., the extent to which firms and vendors can foresee contingencies when designing contracts for outsourced IT services, can alleviate holdup. While extensively detailed contracts are likely to include a greater breadth of activities outsourced to a vendor, task complexity makes it difficult to draft extensive contracts. Furthermore, extensive contracts may still be incomplete with respect to enforcement. We then examine the role of nonprice contractual provisions, contract duration, and extendibility terms, which give firms an option to extend the contract to limit the likelihood of holdup. We also validate the ex post efficiency of contract design choices by examining renewals of contracting agreements. © 2010 INFORMS. | - |
dc.language | eng | - |
dc.relation.ispartof | Information Systems Research | - |
dc.subject | Contract duration | - |
dc.subject | Incomplete contracts | - |
dc.subject | Holdup | - |
dc.subject | Extendibility clauses | - |
dc.subject | Underinvestment | - |
dc.subject | Information technology outsourcing | - |
dc.title | Contractual provisions to mitigate holdup: Evidence from information technology outsourcing | - |
dc.type | Article | - |
dc.description.nature | link_to_subscribed_fulltext | - |
dc.identifier.doi | 10.1287/isre.1080.0204 | - |
dc.identifier.scopus | eid_2-s2.0-77954300639 | - |
dc.identifier.volume | 21 | - |
dc.identifier.issue | 1 | - |
dc.identifier.spage | 37 | - |
dc.identifier.epage | 55 | - |
dc.identifier.eissn | 1526-5536 | - |
dc.identifier.isi | WOS:000276082100003 | - |
dc.identifier.issnl | 1047-7047 | - |