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

Henri Dekker; T. Kawai; J. Sakaguchi

doi:10.1016/j.mar.2017.09.003

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 Journal › Article › Academic › peer-review

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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.

Original language	English
Pages (from-to)	47-61
Number of pages	15
Journal	Management Accounting Research
Volume	40
DOIs	https://doi.org/10.1016/j.mar.2017.09.003
Publication status	Published - 1 Sept 2018

Funding

This work was supported by JSPS KAKENHI grant numbers 17K04085, 15K03796, 26285103. We are grateful for the constructive comments provided on this study by the editor (Theresa Libby), three anonymous reviewers, Margaret Abernethy, Bart Bruin, Takehisa Kajiwara, Anne Lillis, Yasushi Onishi, Martijn Schoute, Eelke Wiersma, and seminar and conference participants at Kobe University, The University of Melbourne, Vrije Universiteit Amsterdam, the 38th European Accounting Association Annual Congress in Glasgow 2015 and the Global Management Accounting Research Symposium (GMARS) in Sydney 2014.

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 17 Partnerships for the Goals

Keywords

Contract design
Contracting costs
Cross-border
Interfirm relationships
Outsourcing

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10.1016/j.mar.2017.09.003

Contracting abroad A comparative analysis of contract design in host and home country outsourcing relationsFinal published version, 272 KBLicence: Article 25fa Dutch Copyright Act

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AU - Sakaguchi, J.

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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 - Contract design

KW - Contracting costs

KW - Cross-border

KW - Interfirm relationships

KW - Outsourcing

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JO - Management Accounting Research

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ER -

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

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UN SDGs

Keywords

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