Freelance Contracting in the Digital Age: Informality, Virtuality and Social Ties

30 Pages Posted: 9 Nov 2012

See all articles by Andrey Shevchuk

Andrey Shevchuk

National Research University Higher School of Economics

Denis Strebkov

National Research University Higher School of Economics

Date Written: November 8, 2012

Abstract

Based on a sample of 5,784 Russian-speaking respondents, this study provides the first quantitative evidence on freelance contracting via the Internet. We explore the extent to which these virtual business relations are formal or informal, and the role of social capital and networking. Our data suggest freelancers act under constant threat of malfeasance from clients. We address a number of questions associated with freelancers’ business risks and how freelancers might mitigate them.

The logistic regression models reveal that the virtualization of relationships with clients is associated with greater moral hazard risks and fewer opportunities for dispute resolution. Formal written contracts do not prevent opportunistic behaviors by clients, though such contracts help resolve conflicts. Dealing with available social contacts and referrals decreases both the probability of extreme opportunism, causing financial losses, and the probability that disputes remain unresolved. Nevertheless, established social relations could be exploited by clients who can delay payments or insist on altering deadlines, work scope and specifications.

Thus, our findings contribute to existing literatures on social capital in freelance contracting and on the structure of occupational labor markets.

Keywords: freelancers, independent contractors, self-employment, Internet, opportunism, social capital

JEL Classification: Z13

Suggested Citation

Shevchuk, Andrey and Strebkov, Denis, Freelance Contracting in the Digital Age: Informality, Virtuality and Social Ties (November 8, 2012). Higher School of Economics Research Paper No. WP BRP 12/SOC/2012 . Available at SSRN: https://ssrn.com/abstract=2172702 or http://dx.doi.org/10.2139/ssrn.2172702

Andrey Shevchuk (Contact Author)

National Research University Higher School of Economics ( email )

Myasnitskaya street, 20
Moscow, Moscow 119017
Russia

Denis Strebkov

National Research University Higher School of Economics ( email )

Myasnitskaya street, 20
Moscow, Moscow 119017
Russia

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