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Resource Dependence, Alternative Supply Sources, and the Design of Formal Contracts
Author(s) -
Malatesta Deanna,
Smith Craig R.
Publication year - 2011
Publication title -
public administration review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.721
H-Index - 139
eISSN - 1540-6210
pISSN - 0033-3352
DOI - 10.1111/j.1540-6210.2011.02392.x
Subject(s) - business , restructuring , procurement , agency (philosophy) , industrial organization , government (linguistics) , microeconomics , contract management , corporate governance , resource dependence theory , set (abstract data type) , resource (disambiguation) , government procurement , economics , marketing , finance , computer science , philosophy , linguistics , epistemology , programming language , computer network
Employing a resource dependence theoretical framework, the authors analyze a set of recently awarded contracts between the Environmental Protection Agency and its suppliers to determine how joint dependence, supplier dependence, and government dependence affect contract design—specifically, the decision to use a cost‐plus (flexible) contract. Findings provide evidence that organizations choose contract designs that will reduce uncertainty related to securing critical resources. However, different dimensions of dependence have different effects: (1) higher levels of joint dependence lead to more flexible governance forms; (2) the lack of alternative suppliers is a more important factor than high levels of financial dependence; and (3) the parties involved in government procurement are likely to perceive government as a unique type of organization, which, in turn, has implications for contract design choices. The authors conclude with managerial strategies for restructuring power/dependence relationships to achieve the contract design most likely to yield a surplus in the exchange.