Costs, Transaction-Specific Investments and Vendor Dominance of the Marketplace: The Economics of IS Outsourcing

2002 ◽  
pp. 47-76 ◽  
Author(s):  
Soon Ang ◽  
Detmar Straub
Keyword(s):  
Specific Investments ◽  
Is Outsourcing ◽  
Economics Of Is

Hierarchical Forms of Outsourcing and the Creation of Dependency

2007 ◽  
Vol 28 (5) ◽  
pp. 709-727 ◽  
Author(s):  
Ulrike Muehlberger
Keyword(s):  
Empirical Evidence ◽  
Insurance Industry ◽  
Governance Structures ◽  
Relational Contracts ◽  
Specific Investments ◽  
Support Measures ◽  
The Creation ◽  
Conditions Of Work ◽  
Is Outsourcing

The focus of this paper is outsourcing activities, where the contracting worker is formally self-employed but the conditions of work are similar to those of employees. It is argued that the outsourced workers are dependent on or integrated into the firm for which they work. We investigate the mechanisms by which firms mix governance structures and give evidence of how these `hierarchical' forms of outsourcing create dependency. The key argument of this paper is that firms have established governance structures based on markets, hierarchies and self-enforcing relational contracts so that they are able to keep a substantial amount of control despite sourcing out of labour. Furthermore, we argue that such hierarchical forms of outsourcing produce dependency. Using empirical evidence of the Austrian insurance industry, it is demonstrated that dependency is created, firstly, by the contractual restriction of alternative uses of resources, secondly, by support measures that bind the worker closely to the outsourcing firm, thirdly, by relationship-specific investments made by the worker and, fourthly, by authority elements.

Investments and Risk Transfers

2017 ◽  
Vol 92 (6) ◽  
pp. 1-23 ◽  
Author(s):  
Tim Baldenius ◽  
Beatrice Michaeli
Keyword(s):  
Moral Hazard ◽  
Risk Premium ◽  
Bargaining Power ◽  
Risk Premia ◽  
The Other ◽  
Investment Risk ◽  
Incomplete Contracting ◽  
Risk Transfer ◽  
Specific Investments ◽  
Division Managers

ABSTRACT We demonstrate a novel link between relationship-specific investments and risk in a setting where division managers operate under moral hazard and collaborate on joint projects. Specific investments increase efficiency at the margin. This expands the scale of operations and thereby adds to the compensation risk borne by the managers. Accounting for this investment/risk link overturns key findings from prior incomplete contracting studies. We find that if the investing manager has full bargaining power vis-à-vis the other manager, he will underinvest relative to the benchmark of contractible investments; with equal bargaining power, however, he may overinvest. The reason is that the investing manager internalizes only his own share of the investment-induced risk premium (we label this a “risk transfer”), whereas the principal internalizes both managers' incremental risk premia. We show that high pay-performance sensitivity (PPS) reduces the managers' incentives to invest in relationship-specific assets. The optimal PPS, thus, trades off investment and effort incentives.

The Value of Information in the Hold-Up Problem

2004 ◽  
Vol 5 (2) ◽  
pp. 177-203 ◽  
Author(s):  
Thomas Pfeiffer
Keyword(s):  
Information System ◽  
Information Structure ◽  
Value Of Information ◽  
The Other ◽  
Information Control ◽  
Ceteris Paribus ◽  
Head Office ◽  
Specific Investments ◽  
Negative Effect ◽  
Central Management

Abstract In the literature, the information structure of the hold-up problem is typically assumed to be exogenous. In this paper, we introduce an additional stage at which the head office may grant individual divisions access to an information system before they undertake their specific investments. Although more information ceteris paribus enhances each divisions’ profits, more information can reduce divisions’ investments and destroy synergies for the other division that would have been generated by the investments. If this negative effect dominates, then information can be harmful for the entire company. Hence, information control can be a subtle force to deal with the hold-up problem to a certain extent. In this paper we analyze those conditions under which information is either harmful or beneficial for central management.

From technical to non-technical skills among information systems suppliers

2017 ◽  
Vol 30 (2) ◽  
pp. 320-334 ◽  
Author(s):  
Bénédicte Branchet ◽  
Pierre-Yves Sanseau
Keyword(s):  
Information Systems ◽  
Business Models ◽  
Work Organization ◽  
Technical Skills ◽  
Content Type ◽  
Face To Face ◽  
Key Skills ◽  
Critical Skills ◽  
Education And Society ◽  
Is Outsourcing

Purpose Existing research infers that in the information systems (IS) and information technology (IT) fields, a shift may occur between technical and non-technical skills. However, relatively little research has focused on going changes in terms of key skills in the IS suppliers sector. The purpose of this paper is to address this gap by investigating these skills evolution in the IS suppliers domain and discusses their impacts on IS and IT curricula. Design/methodology/approach This paper uses a qualitative method based on 15 semi-structured face-to-face interviews, with highly dedicated operational managers in senior positions in the field. Findings This study identifies, for the IS suppliers, the critical skills, which are basically non-technical, and peripheral skills, which are primarily technical. It then considers the consequences of this change and the necessary adaptations it requires for businesses and training for this field. Practical implications The findings suggest the need to redesign the educational curricula for future managers, and the adaptations required to the work organization, human resource management and business models of firms in the field. Originality/value The paper’s value is twofold. First, it focuses on IS service suppliers, an understudied area (most research examines IS outsourcing from the customer’s standpoint); second, it reveals the shift away from technical toward non-technical skills in a field that is intrinsically technical – a change that may occur more slowly than in other less technical sectors – and the consequences of this change for firms, education and society.

A seller perspective on economic and non-economic satisfaction as precursors to formalisation, specific investments and dependence in business relationships

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Nils M. Høgevold ◽  
Gøran Svensson ◽  
Mercy Mpinganjira
Keyword(s):  
Structural Equation ◽  
Positive Influence ◽  
Point Of View ◽  
Exchange Relationships ◽  
Content Type ◽  
Specific Investment ◽  
Specific Investments ◽  
Economic Satisfaction ◽  
Business Exchange ◽  
Business To Business

PurposeSeen from the seller's point of view, this study examines economic and non-economic satisfaction as distinct conceptual variables, and tests how the constructs relate to each other and to the business transactional cost variables of formalisation, specific investments and dependence.Design/methodology/approachData was collected from 213 key informants from Norwegian companies involved in business-to-business marketing. Structural equation modelling was used to test the posited hypotheses.FindingsThe findings show that sellers' economic satisfaction exerts a positive influence on non-economic satisfaction and on formalisation, while its posited influence on specific investments was not found to be significant. Formalisation was, however, not significantly influenced by seller non-economic satisfaction. Specific investment was positively influenced by seller non-economic satisfaction. The influence of formalisation on specific investments and dependence was significant. Specific investments were also found to be positively influenced by dependence.Research limitations/implicationsThe study reveals the importance of assessing both economic and non-economic satisfaction in trying to understand sellers' behaviour in business-to-business markets.Practical implicationsThe findings show the need for managers to ensure economic satisfaction, as its affects non-economic satisfaction.Originality/valueThis study contributes to a better understanding of satisfaction in business-to-business exchange relationships and its relationship with transactional cost constructs based on a seller's perspective.

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