Contracting abroad: A comparative analysis of contract design in host and home country outsourcing relations

Henri Dekker, T. Kawai, J. Sakaguchi

Research output: Contribution to journalArticle

Abstract

Cross-border business relationships often involve significant risk because they entail greater information asymmetry and complexity to manage collaboration than domestic relationships. Yet, little is known about the contractual design of such relationships. We examine a prominent form of cross-border collaboration – firms’ strategic outsourcing in a host country where they operate – and contrast contracting choices with those made for similar home country relations. We collect survey data from Japanese subsidiaries operating and outsourcing in the Netherlands, and from Japanese firms outsourcing in Japan. Results show that contract complexity does not differ between similar home and host country relationships; however, consistent with our hypotheses, host country contracts have a shorter duration, more renewal provisions, less flexibility, and relatively greater contracting costs.
LanguageEnglish
JournalManagement Accounting Research
DOIs
StateAccepted/In press - 2018

Cite this

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title = "Contracting abroad: A comparative analysis of contract design in host and home country outsourcing relations",
abstract = "Cross-border business relationships often involve significant risk because they entail greater information asymmetry and complexity to manage collaboration than domestic relationships. Yet, little is known about the contractual design of such relationships. We examine a prominent form of cross-border collaboration – firms’ strategic outsourcing in a host country where they operate – and contrast contracting choices with those made for similar home country relations. We collect survey data from Japanese subsidiaries operating and outsourcing in the Netherlands, and from Japanese firms outsourcing in Japan. Results show that contract complexity does not differ between similar home and host country relationships; however, consistent with our hypotheses, host country contracts have a shorter duration, more renewal provisions, less flexibility, and relatively greater contracting costs.",
keywords = "Interfirm relationships, Outsourcing, Cross-border, Contract Design, Contracting Costs",
author = "Henri Dekker and T. Kawai and J. Sakaguchi",
year = "2018",
doi = "10.1016/j.mar.2017.09.003",
language = "English",
journal = "Management Accounting Research",
issn = "1044-5005",
publisher = "Academic Press Inc.",

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AU - Dekker,Henri

AU - Kawai,T.

AU - Sakaguchi,J.

PY - 2018

Y1 - 2018

N2 - Cross-border business relationships often involve significant risk because they entail greater information asymmetry and complexity to manage collaboration than domestic relationships. Yet, little is known about the contractual design of such relationships. We examine a prominent form of cross-border collaboration – firms’ strategic outsourcing in a host country where they operate – and contrast contracting choices with those made for similar home country relations. We collect survey data from Japanese subsidiaries operating and outsourcing in the Netherlands, and from Japanese firms outsourcing in Japan. Results show that contract complexity does not differ between similar home and host country relationships; however, consistent with our hypotheses, host country contracts have a shorter duration, more renewal provisions, less flexibility, and relatively greater contracting costs.

AB - Cross-border business relationships often involve significant risk because they entail greater information asymmetry and complexity to manage collaboration than domestic relationships. Yet, little is known about the contractual design of such relationships. We examine a prominent form of cross-border collaboration – firms’ strategic outsourcing in a host country where they operate – and contrast contracting choices with those made for similar home country relations. We collect survey data from Japanese subsidiaries operating and outsourcing in the Netherlands, and from Japanese firms outsourcing in Japan. Results show that contract complexity does not differ between similar home and host country relationships; however, consistent with our hypotheses, host country contracts have a shorter duration, more renewal provisions, less flexibility, and relatively greater contracting costs.

KW - Interfirm relationships

KW - Outsourcing

KW - Cross-border

KW - Contract Design

KW - Contracting Costs

U2 - 10.1016/j.mar.2017.09.003

DO - 10.1016/j.mar.2017.09.003

M3 - Article

JO - Management Accounting Research

T2 - Management Accounting Research

JF - Management Accounting Research

SN - 1044-5005

ER -