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Performance Based Contracts

Risks of Performance-based Contracts – A Social Capital Perspective

Performance-based contracts (PBC) are contracts where the “customer’s focus is on contracting a performance goal or outcome rather than on how to achieve this goal” (Hypko et al.,2010). 

The aim of this research is to study the effects of social capital (generally but partially, trust and interactions between suppliers and customers) on risks in PBC compared with risks in traditional, transactional contracts (Behaviour-Based Contracts or BBC).

Hypotheses

 

Research methods

Expected results

  • Relationship: Determine the relationship between social capital and suppliers’ risks in performance-based contracts and transactional contracts.
  • Comparison: of the effects of social capital on risks in performance-based contracts and in transactional contracts.
  • Prediction: Identify which dimension (structural, cognitive or relational) and which level (firm level, individual level or contract level) of social capital have the most important effects on risks.

Benefits to industry

Gain a better understanding of:

  • Risks of PBC – better risk management
  • Customers’ concerns about risks – better customer satisfaction
  • Effects of social capital on risks – better relationship management.

 

Academics and companies who are interested in the project are warmly welcomed for discussion and participation.

Contact: Jinghen Hou

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