Search results

1 – 10 of over 34000
Article
Publication date: 16 October 2009

Wenxia You and Xianjia Wang

The purpose of this paper is to analyze and solve the problem of moral hazard in firms because of asymmetry information between firms and workers and to contract upon the workers'…

Abstract

Purpose

The purpose of this paper is to analyze and solve the problem of moral hazard in firms because of asymmetry information between firms and workers and to contract upon the workers' shiftless actions.

Design/methodology/approach

Based on principle‐agent theory and human resource management practice, an optimal dynamic wage contract model is designed. By applying simulation technology, the dynamic wage contract model is compared to the general static wage contract model and the affects made by the optimal dynamic wage contract to workers and firms are analyzed.

Findings

According to the consequences of simulation, the dynamic wage contract has better characteristics and is more practical than the static one. In the dynamic wage contract, the current action of a worker has a persistent effect on the future outcome. It is proved that the dynamic wage contract is optimal to the firm. The optimal dynamic wage contract is renegation‐proofness. It not only can incentive workers to work hard and help the firm achieve Pareto efficiency, but also can smooth the firm's incentive costs and reduce the risk born by workers.

Originality/value

The paper provides some reasonable conclusions for the human resource management in firms.

Details

Kybernetes, vol. 38 no. 10
Type: Research Article
ISSN: 0368-492X

Keywords

Article
Publication date: 24 April 2020

Hong Zhang, Lu Yu and Wenyu Zhang

This study is aimed to explore the dynamic performance incentive model for a flexible PPP contract to handle uncertainties based on supervision during the long-time concession…

Abstract

Purpose

This study is aimed to explore the dynamic performance incentive model for a flexible PPP contract to handle uncertainties based on supervision during the long-time concession period, so as to ensure operation performance and benefits of the public sector while protecting the economic benefit of the private sector, thus avoiding unnecessary renegotiation.

Design/methodology/approach

The microeconomic and principal–agent theories and relevant studies on the basic incentive model and flexible contract are fully utilized. The procedure for developing the dynamic incentive model and the assumptions about the quantitative relationships among fundamental variables or factors are first proposed. The static incentive model without incentive parameter adjustment and then the dynamic incentive model allowing incentive parameter adjustment are successively developed. Finally, the propositions regarding the valid adjustment ranges of the incentive parameter with respect to the economic, social and hybrid benefits of the public sector and the economic benefit of the private sector are suggested.

Findings

The dynamic incentive model enables to achieve a flexible contract to handle uncertainties on the PPP project to ensure the benefits of the public sector while protecting the benefit of the private sector. The economic, social and hybrid benefits of the public sector and the economic benefit of the private sectors can be respectively realized through adjusting the reward–punishment coefficient under different adjustment ranges and different importance. The incentive model is able to ensure the benefits of the public sector while protecting the benefit of the private sector by controlling the private sector's effort level unknown to the public sector.

Originality/value

The dynamic incentive model helps implement a flexible PPP contract to handle uncertainties during the operation period, thus controlling the effort level of the private sector and ensuring the benefits of the public sector while protecting the economic benefit of the sector. It enables to clarify the quantitative relationships between the operation performance, the benefits of the stakeholders, the effort level of the private sector and the reward–punishment coefficient. This study contributes to the domain knowledge of the incomplete contract theory for designing a flexible PPP contract with dynamic incentive and supervision mechanism by applying the microeconomic and principal–agent theories.

Details

Engineering, Construction and Architectural Management, vol. 27 no. 9
Type: Research Article
ISSN: 0969-9988

Keywords

Open Access
Article
Publication date: 4 July 2022

Shiyu Wan, Yisheng Liu, Grace Ding, Goran Runeson and Michael Er

This article aims to establish a dynamic Energy Performance Contract (EPC) risk allocation model for commercial buildings based on the theory of Incomplete Contract. The purpose…

1490

Abstract

Purpose

This article aims to establish a dynamic Energy Performance Contract (EPC) risk allocation model for commercial buildings based on the theory of Incomplete Contract. The purpose is to fill the policy vacuum and allow stakeholders to manage risks in energy conservation management by EPCs to better adapt to climate change in the building sector.

Design/methodology/approach

The article chooses a qualitative research approach to depict the whole risk allocation picture of EPC projects and establish a dynamic EPC risk allocation model for commercial buildings in China. It starts with a comprehensive literature review on risks of EPCs. By modifying the theory of Incomplete Contract and adopting the so-called bow-tie model, a theoretical EPC risk allocation model is developed and verified by interview results. By discussing its application in the commercial building sector in China, an operational EPC three-stage risk allocation model is developed.

Findings

This study points out the contract incompleteness of the risk allocation for EPC projects and offered an operational method to guide practice. The reasonable risk allocation between building owners and Energy Service Companies can realize their bilateral targets on commercial building energy-saving benefits, which makes EPC more attractive for energy conservation.

Originality/value

Existing research focused mainly on static risk allocation. Less research was directed to the phased and dynamic risk allocation. This study developed a theoretical three-stage EPC risk allocation model, which provided the theoretical support for dynamic EPC risk allocation of EPC projects. By addressing the contract incompleteness of the risk allocation, an operational method is developed. This is a new approach to allocate risks for EPC projects in a dynamic and staged way.

Details

International Journal of Climate Change Strategies and Management, vol. 15 no. 4
Type: Research Article
ISSN: 1756-8692

Keywords

Article
Publication date: 12 January 2023

Jia Jia Chang, Zhi Jun Hu and Changxiu Liu

In this study, a dynamic contracting model is developed between a venture capitalist (VC) and an entrepreneur (EN) to explore the influence of asymmetric beliefs regarding…

Abstract

Purpose

In this study, a dynamic contracting model is developed between a venture capitalist (VC) and an entrepreneur (EN) to explore the influence of asymmetric beliefs regarding output-relevant parameters, agency conflicts and complementarity on the VC's posterior beliefs through the EN's unobservable effort choices to influence the optimal dynamic contract.

Design/methodology/approach

The authors construct the contracting model by incorporating the VC's effort, which is ignored in most studies. Using backward induction and a discrete-time approximation approach, the authors solve the continuous-time contract design problem, which evolves into a nonlinear ordinary differential equation (ODE).

Findings

The optimal equity share that the VC provides to the EN decreases over time. In accordance with the empirical evidence, the EN's optimistic beliefs regarding the project's profitability positively affect its equity share. However, the interactions between the optimal equity share, project risk and both partners' degrees of risk aversion are not monotonic. Moreover, the authors find that the optimal equity share increases with the degree of complementarity, which indicates that the EN is willing to cooperate with the VC. This study’s results also show that the optimal equity shares at each time are interdependent if the VC is risk-averse and independent if the VC is risk-neutral.

Research limitations/implications

In conclusion, the authors highlight two potential directions for future research. First, the authors only considered a single VC, whereas in practice, a risk project may be carried out by multiple VCs, and it is interesting to discuss how the degree of complementarity affects the number of VCs that ENs contract. Second, the authors may introduce jumps and consider more general multivariate stochastic volatility models for output dynamics and analyze the characteristics of the optimal contracts. Third, further research can deal with other forms of discretionary output functions concerning complementarity, such as Cobb–Douglas and constant elasticity of substitution (See Varian, 1992).

Social implications

The results of this study have several implications. First, it offers a novel approach to designing dynamic contracts that are specific and easy to operate. To improve the complicated venture investment situation and abate conflict between contractual parties, this study plays a good reference role. Second, the synergy effect proposed in this study provides a theoretical explanation for the executive compensation puzzle in economics, in which managers are often “rewarded for luck” (Bertrand and Mullainathan, 2001; Wu et al., 2018). This result indicates a realistic perspective on financing and establishing cooperative relationships, which enhances the efficiency of venture investment. Third, from an empirical standpoint, one can apply this framework to study research and development (R&D) problems.

Originality/value

First, the authors introduce asymmetric beliefs and Bayesian learning to study the dynamic contract design problem and discuss their effects on equity share. Second, the authors incorporate the VC's effort into the contracting problem, and analyze the synergistic effect of effort complementarity on the optimal dynamic contract.

Details

Kybernetes, vol. 53 no. 4
Type: Research Article
ISSN: 0368-492X

Keywords

Article
Publication date: 14 August 2017

Asif Qumer Gill, Ali Braytee and Farookh Khadeer Hussain

The aim of this paper is to report on the adaptive e-contract information management reference architecture using the systematic literature review (SLR) method. Enterprises need…

Abstract

Purpose

The aim of this paper is to report on the adaptive e-contract information management reference architecture using the systematic literature review (SLR) method. Enterprises need to effectively design and implement complex adaptive e-contract information management architecture to support dynamic service interactions or transactions.

Design/methodology/approach

The SLR method is three-fold and was adopted as follows. First, a customized literature search with relevant selection criteria was developed, which was then applied to initially identify a set of 1,573 papers. Second, 55 of 1,573 papers were selected for review based on the initial review of each identified paper title and abstract. Finally, based on the second review, 24 papers relevant to this research were selected and reviewed in detail.

Findings

This detailed review resulted in the adaptive e-contract information management reference architecture elements including structure, life cycle and supporting technology.

Research limitations/implications

The reference architecture elements could serve as a taxonomy for researchers and practitioners to develop context-specific service e-contract information management architecture to support dynamic service interactions for value co-creation. The results are limited to the number of selected databases and papers reviewed in this study.

Originality/value

This paper offers a review of the body of knowledge and novel e-contract information management reference architecture, which is important to support the emerging trends of internet of services.

Details

VINE Journal of Information and Knowledge Management Systems, vol. 47 no. 3
Type: Research Article
ISSN: 2059-5891

Keywords

Article
Publication date: 18 April 2017

Daniel Ellström and Martin Hoshi Larsson

The purpose of this paper is to understand differences between open-book accounting (OBA) using static prices and OBA using dynamic prices. The authors identify how these…

1037

Abstract

Purpose

The purpose of this paper is to understand differences between open-book accounting (OBA) using static prices and OBA using dynamic prices. The authors identify how these differences influence various aspects of customer–supplier relationships.

Design/methodology/approach

This paper is based on a case study involving a builders’ merchant and a wood manufacturer in the UK. The builders’ merchant under discussion has recently outsourced part of its production to the aforementioned wood manufacturer by using OBA with dynamic prices. For this case study, the authors have conducted interviews with multiple people from both parties in the agreement. Additional illustrative cases are provided through a study of other qualitative papers on OBA.

Findings

The authors find evidence supporting that, when dynamic prices are used in OBA, risk (unpredictability) is shifted from the supplier to the customer. Also, the customer frequently focuses on the supplier’s costs, both parties often aim for a long-term relationship and the customer becomes more dependent on the supplier, causing high interdependence. Furthermore, empirical evidence suggests that the customer finds price less important, and the reallocation of activities between the customer and supplier is easier in OBA setups in which dynamic prices are used.

Originality/value

This paper provides the first study of how differences between dynamic and static prices in OBA influence the customer–supplier relationship. This paper adds to the developing literature on OBA, in particular, as well as to literature on pricing, in general.

Details

Qualitative Research in Accounting & Management, vol. 14 no. 1
Type: Research Article
ISSN: 1176-6093

Keywords

Article
Publication date: 14 August 2023

Sani Majumder, Izabela Nielsen, Susanta Maity and Subrata Saha

This paper aims to analyze the potentials of dynamic, commitment and revenue-sharing contracts; that a nonrebate offering manufacturer can use to safeguard his profit while his…

Abstract

Purpose

This paper aims to analyze the potentials of dynamic, commitment and revenue-sharing contracts; that a nonrebate offering manufacturer can use to safeguard his profit while his competitor offers customer rebates in a supply chain consisting of two manufacturers and a common retailer.

Design/methodology/approach

We consider a two-period supply chain model to explore optimal decisions under eight possible scenarios based on the contract and rebate offering decisions. Because the manufacturers are selling substitutable products, therefore, a customer rebate on one of the products negatively impacts the selling quantity of other. Optimal price, rebate, and quantities are examined and compared to explore the strategic choice for both the rebate offering and non-rebate offering manufacturer. Comparative evaluation is conducted to pinpoint how the parameters such as contract parameters and its nature affect the members.

Findings

The results demonstrate that all these contracts instigate the rebate offering manufacturer to provide a higher rebate, but do not ensure a higher profit. If the revenue sharing contract is offered to the common retailer, the effectiveness of the rebate program might reduce significantly, and the rebate offering manufacturer might receives lower profits. A non-rebate offering manufacturer might use a commitment contract to ensure higher profits for all the members and make sure the common retailer continues the product.

Originality/value

The effect of customer rebate vs. supply chain contract under competition has not yet been explored comprehensively. Therefore, the study contributes to the literature regarding interplay among pricing decision, contract choice and rebate promotion in a two-period setting. The conceptual and managerial insights contribute to a better understanding of strategic decision-making for both competing manufacturers under consumer rebates.

Details

Journal of Modelling in Management, vol. 19 no. 2
Type: Research Article
ISSN: 1746-5664

Keywords

Article
Publication date: 22 June 2010

Soili Nystén‐Haarala, Nari Lee and Jukka Lehto

New business models, such as life‐cycle contracting, challenge the narrow and static understanding of contracts with hard and precise terms. The aim of this paper is to examine…

5002

Abstract

Purpose

New business models, such as life‐cycle contracting, challenge the narrow and static understanding of contracts with hard and precise terms. The aim of this paper is to examine how flexibility could be incorporated into contracting processes.

Design/methodology/approach

The data of the paper have been gathered applying the triangular method; first, by interviewing key personnel participating in contracting at eight Finnish firms; second, examining contract and other documents of those companies; and third, studying earlier research on contracting practices. Theoretically, the paper is based on relational contract and proactive approaches to law on the one hand and on organizational studies based on new institutional economics on the other.

Findings

Flexibility is often introduced to contracts with relational methods, relying on good personal relationships between business partners or negotiation power and negotiation skills. Contract documents often do not contain mechanisms for dealing with contingencies, or “soft” contract terms. The paper finds the following reasons that may explain this. First, firms heavily rely on model contracts to develop their own templates and the lack of contract models in new business areas hinders firms to develop their templates. Second, unfamiliarity with using soft elements makes it difficult to use them. Additionally, in some cases firms may prefer using relational capability.

Research limitations/implications

The findings need verification from further multidisciplinary empirical research.

Practical implications

The findings support firms in developing their contracting capabilities to meet the requirements of the changing business environment and gain competitive advantage from well‐organized contracting.

Originality/value

This paper is one of the first empirical studies comprising also the legal approach.

Details

International Journal of Managing Projects in Business, vol. 3 no. 3
Type: Research Article
ISSN: 1753-8378

Keywords

Article
Publication date: 31 August 2022

Bo Tian, Jiaxin Fu, Yongshun Xu and Longshan Sun

The risks and uncertainties of public–private partnership (PPP) projects threaten their sustainability. Contract flexibility, which is based on the theory of incomplete contract

Abstract

Purpose

The risks and uncertainties of public–private partnership (PPP) projects threaten their sustainability. Contract flexibility, which is based on the theory of incomplete contract and transaction cost, may be a viable solution to this issue. The purpose of this study is to investigate the relationship between contract flexibility and the sustainability performance of PPP projects. The multiple mediating roles of justice perception and cooperation efficiency are assessed, thereby allowing the pathways and conditions to be understood more comprehensively for improving the sustainability performance of PPP projects.

Design/methodology/approach

Nine hypotheses in the proposed research model are tested via structural equation modeling using data acquired from 218 Chinese PPP professionals.

Findings

Results show that contract flexibility positively affects PPP project sustainability performance. Justice perception and cooperation efficiency play direct and sequential mediating roles in this effect.

Originality/value

This study validates that contract flexibility positively impacts the sustainability performance of PPP projects, where justice perception and cooperation efficiency serve direct and sequential mediating roles. The findings of this study contribute to an improved understanding of the effect of contract flexibility on the sustainability performance of PPP projects. Furthermore, they provide important theoretical and practical insights into contract management as well as beneficial information and valuable initiatives for improving the sustainability of PPP projects.

Details

Engineering, Construction and Architectural Management, vol. 31 no. 1
Type: Research Article
ISSN: 0969-9988

Keywords

Article
Publication date: 1 March 2015

Peter Kamminga

Defense acquisition programs are plagued by surging delays and cost overruns. In particular, contract management of defense acquisition programs has been identified as 'high risk'…

Abstract

Defense acquisition programs are plagued by surging delays and cost overruns. In particular, contract management of defense acquisition programs has been identified as 'high risk' - and threatening to project results. This article examines how contracts, as legal mechanisms, may be disruptive and obstruct cooperation between the DoD and contractors. The main observation this article makes is that tensions between the norms set forth in contracts and other non-legal norms can become a major reason for problems in defense procurement. It explains why these tensions may undermine cooperative behavior between contractors and the DoD and can become a source of disappointing acquisition program results. A framework is provided for identifying such tensions, and contract design principles are proposed to enhance cooperation and eliminate these tensions when drafting contracts for defense acquisition and other complex programs.

Details

Journal of Public Procurement, vol. 15 no. 2
Type: Research Article
ISSN: 1535-0118

1 – 10 of over 34000