Case Studies: Analysing the Effects of Social Capital on Risks Taken by Suppliers in Outcome-Based Contracts

This is a working paper by Jingchen Hou and Andy Neely. This paper explores the effects of social capital (supplier-customer relationships) on risks taken in outcome-based contracts (OBC) by suppliers. In particular we explore risks of OBC, construction and development of social capital and effects of social capital on risks taken by suppliers. Semi-structured interviews were carried out in seven firms. Based on interviews, risks of OBC are identified and how structural, relational and cognitive social capital are constructed and developed is analysed. Social capital is identified to prevent and mitigate risks. This research can facilitate outcome-based contracts managers to think of risks of their contracts and the effects of customer-supplier relationships. In this way it contributes to firms’ risk management and customer relationship management in providing services by OBC.