Asset ownership & incentives to undertake non‐contractible actions: The case of trucking

Abstract

Firms must continually adjust their operations and those of their supply chain members in response to a continually evolving external environment. Many of these modifications are non‐contractible in that firms cannot devise and enforce contracts on these behaviors. In this research, we extend property rights theory of the firm (PRTF) by suggesting that small entrepreneurs’ ownership of assets used to perform delegated tasks does not always incentivize small entrepreneurs to undertake non‐contractible actions (NCAs) as assumed by canonical PRTF. We argue that the ability of asset ownership to incentivize small entrepreneurs to undertake NCAs will be muted when undertaking NCAs reduces small entrepreneurs’ productivity. We test our hypotheses by examining how trucking companies’ use of independent contractors affected the rate at which they improved compliance with different types of safety rules following a major regulatory change. Consistent with our arguments, we find that the use of independent contractors slowed carriers’ rate of firm‐wide improvement on compliance with hours‐of‐service and vehicle maintenance rules relative to driving safety rules. These results, which remain after extensive robustness testing, have important implications for theory and practice.

Buyer abusive behavior and supplier welfare: An empirical study of truck owner–operators

“…Specifically, framing contract‐unrelated BAB as more serious abuse than contract‐related BAB, we provide initial evidence that there can be a tipping point where individuals become risk‐averse instead of risk‐seeking when the perceived loss passes a certain level. This finding extends the theoretical arguments made by Miller and Saldanha (2016) and Miller et al (2018, 2022), who articled a framework as to why subcontractors working in a highly competitive sector may rationally decide to violate safety rules. By interpreting these rationales through the lens of risk‐taking under prospect theory and threat rigidity and revealing how the two types of BAB can alter the relationship between owner–operator performance and their safety, our study contributes to developing the theoretical framework of supplier welfare in trucking.…”

“…This includes industries such as mining, agriculture, construction of cell phone towers, janitorial franchising, and garment manufacturing (Mayhew & Quinlan, 1997, 2006Weil, 2014). commonality is that large buyers' decisions to shift the work to highly competitive upstream tiers create conditions whereby small upstream suppliers are more likely to prioritize productivity over abiding by labor laws and offering safe working conditions (Miller et al, 2022). This increases the incidence of labor law violations (Ji & Weil, 2015) and safety violations (Miller et al, 2018) compared to when work activities are performed by employees at large firms.…”

Do voluntary environmental programs matter? Evidence from the EPA SmartWay program

“…There is fierce competition for new business opportunities with shippers, instability in fuel rates, rapidly changing demand patterns, and an ongoing labor shortage for commercial drivers (Cantor et al, 2017). Because of these risks, among others, many executives prefer the flexibility that outsourcing transportation services affords to them (e.g., Miller et al, 2021; Mukandwal et al, 2020).…”

“…When there is instability in downstream markets, executives will prefer to use external agents, commonly known as owner–operators in the U.S. motor carrier industry. Owner–operators are hired by trucking operations to haul freight (Miller et al, 2021). They are independent contractors who own and maintain their fleet of physical assets.…”

Boosting Sustainable Operations with Sustainable Supply Chain Modeling: A Case of Organizational Culture and Normative Commitment

“…Sustainable challenges constantly place pressure on states, the market, and civil society to take action [ 10 ]. Enterprises must continually adjust their operations [ 11 ] because they are facing increasingly intense environmental pressure and market competition [ 12 ]. Enterprises are also changing business models in order to adapt to the rapidly changing environment [ 13 , 14 ] and because of this it is important to constantly develop new models that improve sustainability in enterprises and their supply chains, including the logistics sector.…”