Risk, Partner Selection and Contractual Control in Interfirm Relationships

Posted: 13 Nov 2012 Last revised: 3 Aug 2015

See all articles by Rong Ding

Rong Ding

University of Warwick

Henri C. Dekker

VU University Amsterdam - Department of Accounting

Tom Groot

VU University Amsterdam - Amsterdam Research Center in Accounting

Date Written: March 26, 2013

Abstract

This study examines firms’ use of partner selection and formal contracts as key approaches to manage transaction risk in interfirm relationships. We specifically examine the impact of transaction characteristics that generate transaction risk on 1) the importance placed on different selection criteria in the choice of collaboration partner, and 2) the complexity of contracts used to manage the collaboration. Survey data support that when confronted with greater risk from the transaction context, firms place more emphasis on trust-based and reputation-based selection criteria for partner choice and develop more complex (i.e., more inclusive and specific) contracts to manage the collaboration. Furthermore, our results show that partner selection mediates the effects of transaction characteristics on contract complexity, consistent with the argument that the information acquired during the partner selection process in response to risk facilitates the design of contracts to manage risk.

Keywords: transaction risk, interfirm relationships, partner selection criteria, contract complexity

JEL Classification: M4

Suggested Citation

Ding, Rong and Dekker, Henri C. and Groot, Tom, Risk, Partner Selection and Contractual Control in Interfirm Relationships (March 26, 2013). Ding, R., Dekker, H.C. & Groot, T.L.C.M. (2013). Risk, partner selection and contractual control in interfirm relationships. Management Accounting Research, 24, 140-155.. Available at SSRN: https://ssrn.com/abstract=2175083 or http://dx.doi.org/10.2139/ssrn.2175083

Rong Ding (Contact Author)

University of Warwick ( email )

Warwick Business School
University of Warwick
Coventry, CV4 7AL
United Kingdom

Henri C. Dekker

VU University Amsterdam - Department of Accounting ( email )

Netherlands

Tom Groot

VU University Amsterdam - Amsterdam Research Center in Accounting ( email )

De Boelelaan 1105
1081 HV Amsterdam
Netherlands

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
734
PlumX Metrics