Contract design and supplier performance: an empirical investigation using multi-criteria, decision analysis
Ilias Vlachos
International Journal of Productivity and Performance Management, 2020, vol. 70, issue 7, 1655-1681
Abstract:
Purpose - This study aims to investigate how contract design influences supplier performance. This study synthesises three theoretical views (efficiency, relational, contingency) and provides empirical support on how effective contract design improves supplier performance. Design/methodology/approach - This study reviewed contract design literature and uncovered 18 factors that may impact supplier performance. Multi-criteria, decision-making analysis examined the impact of contract factors on three supplier groups: average-, over- and under-performers. Procurement experts working with a large multinational company dealing with hundreds of procuring contracts, yearly, provided their judgement on the impact of these factors on supplier performance. Semi-structured interviews with experts and other evidence were used for data and method triangulation. Findings - Results show that contracting with under- and over- performers presents significant differences: in the case of over-performers, contracts have a dual, yet discrete, efficiency and relational role: at transaction level, they emphasise formality, protect from opportunism and include both liquidated damages and legal action clauses. At relational level, they focus on relational learning and incentivising suppliers. However, in the case of under-performers, contracts appear to focus on contingency factors, which can be a source of ambiguity, particularly in complex environments, and trust, which has a negative impact on supplier performance. Social implications - Improving contract design can help reduce partner opportunism, reduce inter-firm conflicts and avoid disputes that can bear a social cost. This study demonstrates that companies can use advanced analytical tools to reflect upon their own decision-making process of contact design in making transparent supplier performance assessments. Originality/value - To the author’s knowledge, this is the first study using decision-making techniques to enhance supplier performance by improving the contract design process.
Keywords: Contract design; Supplier performance; Multi-criteria decision making (MCDM) methods; DEMATEL; ANP (search for similar items in EconPapers)
Date: 2020
References: Add references at CitEc
Citations:
Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:eme:ijppmp:ijppm-10-2019-0492
DOI: 10.1108/IJPPM-10-2019-0492
Access Statistics for this article
International Journal of Productivity and Performance Management is currently edited by Dr Luisa Huatuco and Dr Nicky Shaw
More articles in International Journal of Productivity and Performance Management from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().