The inter‐organizational relationship in a multi‐contractor business network

Abstract

This paper presents a study on the relationship between the client and the contractor in a multi-contractor business network. A model built on transaction cost economics and relational exchange theory is proposed to determine the preferred governance mechanism as a function of fit with the technical environment of facilities management. Hypotheses in the model are tested by means of data collected from a survey of facilities managers. The dependent variable is relational norm (defined as degree of relational control). The antecedents are asset specificity, decision making uncertainty, risk of malfunction, and trust. The unit of analysis is asset-based dyad consisting of the client and the contractor linked by the asset. It is found that decision making uncertainty has a negative effect on relational norm. On the other hand, a positive relationship exists between asset specificity and relational norm, and this relationship is moderated by risk of malfunction. Practical ImplicationsThe implementation of out-tasking has resulted in a business network whereby more than one contractor works for a client that also has an internal team. It is a challenge to both the client and the contractors. There are conflicting views regarding the need of the client to maintain partnership relationships with its contractors. This paper presents a decision support model, developed through hypotheses testing, for determining the optimal form of relationship that should apply between the client and its contractor in the context of outtasking. In the continuum between contractual and relational control of the contractor, the optimal degree of relational control is contingent upon situational factors. By means of the model, the gap between the current form of relationship and the desired one can be determined. With this knowledge, the facilities manager can then plan change initiatives to close the gap.

Modeling the Impact of Working Capital Management on the Profitability in Industrial Maintenance Business

“…Bailey et al [1] reported that 70 % of the companies in their research sample had outsourced one or more of their business functions. Gradually the outsourcing practice has extended to more and more important functions [4]. Consequently an increasing demand for a variety of industrial services has emerged.…”

Profitable working capital management in industrial maintenance companies

“…Bailey et al (2002) reported that 70 percent of the companies in their research sample had outsourced one or more of their business functions. Gradually the outsourcing practice has extended to more and more important functions (Harland et al, 2005;Hui and Tsang, 2006). Consequently an increasing demand for a variety of industrial services has emerged.…”

Modelling costs in maintenance networks

“…The risks of outsourcing have been addressed in previous research (Al-Turki, 2011;Campbell, 1995;Hui and Tsang, 2006;Leavy, 2001;Murthy et al 2002). However, the perspective has concentrated on just one company, usually the customer.…”

“…Previous studies include numerous cost models for maintenance (Alsyouf, 2006;Hui and Tsang, 2006;Dekker, 1996;Garg and Deshmukh, 2006;Komonen, 2002;Oke, 2005;Sharma et al, 2011;Salonen and Deleryd, 2011;Tam and Price, 2008). There is still a need for pragmatic models which integrate the qualitative and quantitative perspectives, as well as the maintenance network point of view.…”