Procuring complex performance: implications for exchange governance complexity

Abstract

If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.comEmerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services.Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. AbstractPurpose -While previous studies explored the argument that allies the notion of complexity to the complex product-service offerings being procured, this paper aims to explore whether there is a corollary with exchange governance complexity. More specifically, the paper analyzes the relationship between systemic complexity and complexity of contractual and relational exchange governance in procuring complex performance (PCP) arrangements. Design/methodology/approach -A multiple, longitudinal case study method is used to examine the relationship between systemic complexity and exchange governance complexity. The study deploys rich data sets by combining government and company reports with 43 semi-structured interviews.Findings -Preliminary conclusions suggest that as a response to increasing systemic complexity, organizations respond with increasing contractual governance complexity. However, better performing PCP arrangements illustrate that the use of simplified contractual governance in form of working agreements in combination with relational governance such as inter-personal relationships may be more effective to counteract complexity. Practical implications -The paper questions whether organizations should respond with increasing exchange governance complexity to counteract systemic complexity. Managers must consider the manageability and enforceability of complex contracts in combination with the formation of inter-personal relationships and simplified working agreements. Originality/value -This study adds to the limited empirical understanding on the nature of long-term public-private interactions in PCP. It also contributes through a rare focus on the relationship between systemic complexity and exchange governance complexity in PCP arrangements.

Contract functions in service exchange governance: evidence from logistics outsourcing

“…Such literature argues effectively for the impact of complexity on contract design; higher complexity may often lead to more detailed contracts in terms of clauses protecting against opportunism (Roehrich and Lewis 2014). However, simplified contracts coupled with relational capabilities may be more effective, and indeed less detailed contracts may be used (Kreye et al 2015).…”

“…The effectiveness of elaborate contracts can be questionable, and more simplified formal agreements in combination with relational capabilities may render better results in terms of exchange performance (Roehrich and Lewis 2014).…”

“…In particular, the findings stress the role of the contract payment mechanism, in addition to other provisions, in managing complexity and uncertainty in service exchanges (Roehrich and Lewis 2014;Kern and Willcocks 2000). In the cases of extensive perceived uncertainty and service complexity (cases A and C) an open-book, cost-plus charging mechanism was used to hedge against financial risks and adjust costs according to actual operational expenditure.…”

“…It empirically demonstrates how specific contractual provisions are used to codify the service exchange, to safeguard parties against perceived risks and opportunism, to coordinate their actions to improve service delivery, and to adapt the service exchange in response to environmental changes. The paper also builds upon recent efforts to examine the role of contracts in managing (service) complexity (Kreye et al 2015;Roehrich and Lewis 2014) by suggesting that contract functionality extends beyond safeguarding. In addition to offering economic and legal safeguards, contracts are used to coordinate and adapt service exchanges in the face of service complexity and uncertainty.…”

“…In response to increasing complexity and environmental uncertainty resulting from the multiple and highly interactive service components and/or long-term exchange horizons, extensive contracts with detailed clauses that safeguard asset-specific investments are developed (Roehrich and Lewis 2014). This is intended to protect parties against potential opportunism and financial and operational uncertainties (Kern and Willcocks 2000;Williamson 1985).…”