Business Familiarity as Risk Mitigation in Software Development Outsourcing Contracts

Business Familiarity as Risk Mitigation in Software Development Outsourcing Contracts

This study examines the role of business familiarity in determining how software development outsourcing projects are managed and priced to address risks. Increased business familiarity suggests both more prior knowledge, and hence reduced adverse selection risk, and increased implied trust about fu...

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Veröffentlicht in:MIS Quarterly. - Management Information Systems Research Center, University of Minnesota. - 32(2008), 3, Seite 531-551
1. Verfasser: Gefen, David (VerfasserIn)
Weitere Verfasser: Wyss, Simon, Lichtenstein, Yossi
Format: Online-Aufsatz
Sprache:English
Veröffentlicht: 2008
Zugriff auf das übergeordnete Werk:MIS Quarterly
Schlagworte:Business familiarity Software development outsourcing Fixed price Time and materials Agency theory Incomplete contract theory Trust Contractual governance Business Economics mehr... Law Applied sciences Behavioral sciences
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520 |a This study examines the role of business familiarity in determining how software development outsourcing projects are managed and priced to address risks. Increased business familiarity suggests both more prior knowledge, and hence reduced adverse selection risk, and increased implied trust about future behavior, and hence implied reduced moral hazard risk. Preferring high business familiarity partners may also alleviate concerns about incomplete contracts. By reducing these risks, higher business familiarity is hypothesized to be associated with higher priced projects, reduced penalties, and an increased tendency to contract on a time and materials rather than a fixed price basis. These hypotheses were examined with objective contractual legal data from contracts made by a leading international bank. Integrating trust theory into agency theory and into incomplete contract theory and examining unique contract data, the contribution of the study is to show that the premium on business familiarity and the trust it implies is not in directly affecting price, but, rather, in changing how the relationship is managed toward a tendency to sign time and materials contracts. Implications about integrating trust into agency theory and incomplete contract theory, as well as implications regarding trust premiums and software development outsourcing, are discussed. 
540 |a Copyright 2008 The Management Information Systems Research Center (MISRC) of the University of Minnesota 
650 4 |a Business familiarity 
650 4 |a Software development outsourcing 
650 4 |a Fixed price 
650 4 |a Time and materials 
650 4 |a Agency theory 
650 4 |a Incomplete contract theory 
650 4 |a Trust 
650 4 |a Contractual governance 
650 4 |a Business  |x Business operations  |x Commerce  |x Trade  |x Vendors 
650 4 |a Business  |x Business engineering  |x Business risks 
650 4 |a Economics  |x Economic disciplines  |x Financial economics  |x Finance  |x Financial management  |x Financial risk 
650 4 |a Law  |x Civil law  |x Contract law  |x Contracts 
650 4 |a Applied sciences  |x Computer science  |x Computer engineering  |x Computer software 
650 4 |a Business  |x Business administration  |x Human resources  |x Staffing  |x Hiring  |x Hiring practices  |x Outsourcing 
650 4 |a Behavioral sciences  |x Psychology  |x Personality psychology  |x Psychological attitudes  |x Trust 
650 4 |a Applied sciences  |x Computer science  |x Computer engineering  |x Software engineering 
650 4 |a Business  |x Business administration  |x Business management  |x Project management 
650 4 |a Behavioral sciences  |x Behavioral economics  |x Contract theory  |x Incomplete contracts  |x Research Articles 
655 4 |a research-article 
700 1 |a Wyss, Simon  |e verfasserin  |4 aut 
700 1 |a Lichtenstein, Yossi  |e verfasserin  |4 aut 
773 0 8 |i Enthalten in  |t MIS Quarterly  |d Management Information Systems Research Center, University of Minnesota  |g 32(2008), 3, Seite 531-551  |w (DE-627)341354597  |w (DE-600)2068190-2  |x 21629730  |7 nnns 
773 1 8 |g volume:32  |g year:2008  |g number:3  |g pages:531-551 
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952 |d 32  |j 2008  |e 3  |h 531-551