Contract Length Determination in the B2B Service Industry: Role of Economic Factors, Business Relationship, and Learning

In B2B markets, when firms sign contracts for transactions pertaining to the exchange of services that are delivered over a period of time, one critical decision they make is the length (or duration) of the contract. If the services are hired for a long project, companies often sign multiple, successively run contracts with the same vendor. This is prevalent in projects such as when multinational companies hire consulting firms like Accenture to streamline and digitize their business processes, when big banks in developing countries hire firms like Tata Consultancy Services to extend banking facilities into rural markets, and when oil companies hire rig firms to drill oil wells. From a traditional economic perspective, companies would decide on an optimal contract length that is not too long or too short; the former disables the firms from reacting to market changes while the latter makes negotiation costs expensive. However, when a company signs a series of successive contracts with a service-firm, both companies get to learn about the other company’s goals and operations dynamically, which might influence the length of each contract in the series. Thus, determining the contract length in a series of successive contracts is more challenging. In this study, we build a contract length determination model that considers both the economic factors and the dynamic learning. The model provides managers with a theoretical yet practical tool to make optimal decisions on contract length. We use data from the oil-drilling industry to empirically test the proposed model.

Dropout predictors at gyms: a retrospective study

ABSTRACT This study aimed to verify the risk factors associated with gym regulars’ dropout over 12 months. This is an observational, retrospective, cohort study. The sample consisted of two gyms (Gym 1: n=2027, age=39.1 ±13.1 years; Gym 2: n=1775, age=36.8 ±11.6 years). Each participant was followed up for 12 months, or until dropout, by controlling the biometric entry system using a turnstile. The adherence rate was of 11% at Gym 1 and 19% at Gym 2. At both gyms, training frequency ≤3x/month and 4-6x/month was associated with dropout. At gym 1, being a female, aged ≥43 years, and enrollment between October and December were dropout predictors. At Gym 2, dropout was associated with contract length ≤31 days and 32-186 days and enrollment between April and December.

Similarities and Differences Between Financial Lease and Installment Payment in the Islamic Jurisprudence

This article is aimed the similarities and differences between financial lease and Islamic installment payment. Namely, the features like contract length, roles and responsibilities of the parties and other questions. In addition to that, taking as a basis some similarities of financial lease and Islamic installment payment, the opinions of experts who try to match the mentioned above financial tools will be studied in detail. Some points of financial lease that were revealed during the analysis does not correspond to the main rules of Islamic installment payment. Thus, financial lease cannot be fully considered as the analog of Islamic installment payment in the Islamic jurisprudence.

Series of successive B2B contracts: impact on contract length and rental rate

Purpose Companies in the B2B service sector often sign a series of successive contracts instead of one long contract with their vendors. Economic researchers have shown how the lengths of stand-alone contracts are influenced by economic factors such as asset specificity and economic volatility, but have not researched into contracts that are part of a continuous series. The purpose of this study was to explore if being a part of a series of contracts influences the length of the focal contract and the rental rate. Design/methodology/approach The authors use data collected from the oil drilling industry to empirically test their hypotheses. The data set consists of 2,621 contracts involving jack-up rig hiring in the Gulf of Mexico region. Findings The authors empirically show that the series duration affects both the length and rental rate of each constituent contract, even after considering all other plausible economic factors. Specifically, the duration of a series has a positive effect on the length and a negative effect on the rental rate of the constituent contract. Originality/value Although contract length is as vital as the rent in B2B service transactions, it is rather unfortunate that marketing scholars have not researched much into this topic. The findings offer a new insight into the forces that shape the B2B service contracts and thus help the B2B managers make a better decision in service contracts.

Determinants, transactional alignment, and performance outcomes of franchise contract length

Purpose The purpose of this paper is to explore the determinants, transactional alignment and performance outcomes of franchise contract length using transaction costs theory (TCT) and resource-based theory (RBT). Design/methodology/approach The author hypothesizes that franchisors choose contract length according to TCT and RBT arguments. TCT explains the safeguarding function of contracts: the franchisors will offer longer contracts when franchisees’ specific investments are high and environmental uncertainty is low. RBT highlights the knowledge leverage function of contracts: the franchisors will offer longer contracts when the brand name and intangible knowledge assets are high. Franchise companies that design contract length aligned with transactional attributes will perform better. The author tests the misalignment hypothesis and comparative performance of franchise contracts by estimating two-stage least squares regression and Heckman two-stage procedure that control for endogeneity and self-selection. Findings Empirical data from the German franchise sector support the hypotheses. In addition to the safeguarding function, franchise contracts have an important knowledge leverage function. Longer contracts perform better due to the development of relational strategic assets and stronger commitment. Research limitations/implications Franchisors must offer longer contracts when specific investments of franchisees, brand name, intangible knowledge assets are high, and environmental uncertainty is low. Franchisors should invest in the development of relational strategic assets and offer longer contracts for the benefit of superior performance. Originality/value The study addresses the significant question of transactional alignment and comparative performance of franchise contracts. It empirically confirms the importance of RBT in explaining contractual choices and performance.