Contracting Strategies in Entrepreneurial and Established Firms

Abstract

Entrepreneurial and established firms need different contracting strategies because they operate in different environments. Established firms operate in an environment of economic equilibrium, whereas entrepreneurial firms operate in an environment of economic disequilibrium. A general contracting model is developed that takes into account risk, environmental context, governance structure, safeguards, transaction costs, and transaction justice. The model is used to develop hypotheses about how entrepreneurial and established firms’ contracting strategies differ and how contracting strategies lead to firm success or failure.

Building entrepreneurs’ innovativeness through knowledge management: the mediating effect of entrepreneurial alertness

“…In particular, the entrepreneur's experience influences opportunity recognition (Politis 2005). Such experience can lead to good customer relationship management, including business skills, good social networks and business credit, which can help the entrepreneur find and seize opportunities (Hudson and McArthur 1994;Shane and Khurana 2003;Shepherd, Douglas and Shanley 2000;Starr and Bygrave 1992;Wright, Robbie and Ennew 1997). From earlier experience, the entrepreneur gains the capability of to cope with new things, aiding the entrepreneur overcome obstacles and uncertainty, and engagement in risk activity (Aldrich and Auster 1986;Shepherd, Douglas and Shanley 2000;Starr and Bygrave 1992).…”

Supplier Diversity Effectiveness: Does Organizational Culture Really Matter?

“…Supplier management, in particular, is vital for harnessing the opportunity of supplier diversity. Most minority‐owned businesses are smaller in size and small firms often have a liability of newness and a higher risk of failure (Hudson and McArthur 1994). These disadvantages can be reduced through partnering with buying organizations.…”

Outsourcing purchasing services by Third Party Logistics providers: a conceptual model

“…SMEs usually do not have the same bargaining power as large firms, this impacts their possibilities of negotiating lower prices. Hudson and McArthur (1994) discuss in depth the contracting issues for SMEs. The asymmetry position for SMEs makes them unattractive as trading partners because of high risk and relevant transaction costs.…”

“…3PL clients, such as SMEs, struggle with the purchasing price due to lack of sufficient purchasing power or high order quantity. Those firms may be less attractive for the suppliers because of the asymmetry position (Hudson and McArthur, 1994). For international sourcing, it is very difficult for SMEs to exchange information, check quality levels, and reduce costs, due to long distances involved.…”