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The influence of inertia on contract design: contingency planning in information technology service contracts

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  • Kyle J. Mayer

    (University of Southern California, Los Angeles, CA, USA)

  • Janet Bercovitz

    (University of Illinois at Urbana-Champaign, Champaign, IL, USA)

Abstract

This paper examines whether the prior relationship between two firms produces an inertial drag that influences contracts used for subsequent exchanges. Using data from the information technology services industry, we examine whether inertia develops during the relationship between firms in how they plan for contingencies. While attributes of the current exchange do play a role, we find that the prior relationship between the firms has a constricting effect on future contracts. Prior relationships can create what we call interorganizational inertia, which leads firms to use the same level of contingency planning in current exchanges that they used in prior contracts. Copyright © 2008 John Wiley & Sons, Ltd.

Suggested Citation

  • Kyle J. Mayer & Janet Bercovitz, 2008. "The influence of inertia on contract design: contingency planning in information technology service contracts," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 29(2-3), pages 149-163.
    • Handle: RePEc:wly:mgtdec:v:29:y:2008:i:2-3:p:149-163
    DOI: 10.1002/mde.1390
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    References listed on IDEAS

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    Cited by:

    1. Tugba GURCAYLILAR YENIDOGAN & Alp YENIDOGAN, 2013. "Sozlesme Tasarimi: Tur Operatoru-Otel Kontenjan Sozlesmeleri," Ege Academic Review, Ege University Faculty of Economics and Administrative Sciences, vol. 13(3), pages 393-403.
    2. Francesco Saverio Massari & Maria Teresa Riggio & Donato Calace, 2015. "Legal and Managerial Implications of the Italian ‘Contratto Di Rete’," Management, University of Primorska, Faculty of Management Koper, vol. 10(2), pages 131-148.
    3. Björn Eckhard & Thomas Mellewigt & Ingo Weller, 2009. "Vertragsgestaltung in der Automobilindustrie: Transaktionsmerkmale, Erfahrungslernen und Wissensmanagement," Schmalenbach Journal of Business Research, Springer, vol. 61(5), pages 499-529, August.
    4. Lumineau, Fabrice & Frechet, Marc & Puthod, Dominique, 2011. "An organizational learning perspective on contract design," MPRA Paper 38360, University Library of Munich, Germany.
    5. Yanfeng Zheng & Haibin Yang, 2015. "Does Familiarity Foster Innovation? The Impact of Alliance Partner Repeatedness on Breakthrough Innovations," Journal of Management Studies, Wiley Blackwell, vol. 52(2), pages 213-230, March.
    6. Fabrice Lumineau & Marc Fréchet & Dominique Puthod, 2011. "An organizational learning perspective of the contracting process," Post-Print halshs-01019320, HAL.
    7. Zolfaghari, Badri & Madjdi, Farsan, 2022. "Building Trusting Multicultural Organizations: Rethinking the Influence of Culture on Interpersonal Trust Development in the Workplace," Journal of International Management, Elsevier, vol. 28(4).
    8. Wang, Yu & Chen, Yongqiang & Wang, Wenqian & Tang, Yinqiu, 2019. "Differentiating two types of learning in contract design: Evidence from the construction industry," Scandinavian Journal of Management, Elsevier, vol. 35(1), pages 1-11.

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