Effective contracting of uncertain performance outcomes : Allocating responsibility for performance outcomes to align goals across supply chain actors

This dissertation contributes to practice and literature by studying how organizations can effectively contract and sell uncertain performance outcomes. In Chapter 2, I study whether supplier shirking in response to outcome uncertainty can be mitigated by combining performance and behavior specification and evaluation. Based on the findings of this study, I advise purchasing managers to invest in the evaluation of performance and behavior to contain suppliers’ opportunistic behavior. In Chapter 3, I study what causes performance achievement to be uncertain, and how buyers can attenuate the effects. Based on the findings, I explain that outcome uncertainty is related to the roles and activities of buying organizations in the service exchange. To remedy the negative effects, I advise buyers to coordinate relevant activities of their organization with suppliers. In Chapter 4, I study how emotions, which are triggered by a failure to achieve performance outcomes, affect suppliers’ future motivation. Based on the findings, I advise purchasing managers to take into account the context specific factors and resulting emotions in determining when and how to use performance-based contracting. In Chapter 5, I study the supply chain-wide implications of acquiring property rights and obligations associated with selling performance outcomes. Based on the findings, I advise manufacturers to minimize the subsequent financial risks by investing resources in the alignment of incentives and operations across supply chain actors. Overall, this dissertation makes important theoretical advancements concerning goal alignment across supply chain actors through the use of contractual controls and distributions of property rights. In addition, the highlighted recommendations for practitioners, provide buyers and suppliers with detailed insights about how to effectively contract and sell uncertain performance outcomes.

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