Contract Design Choises and the Balance of Ex Ante and Ex Post Transaction Costs in Software Development Outsourcing

This paper examines multiple contract design choices in the context of transaction and relational attributes and consequent ex ante and ex post transaction costs. It focuses on two understudied themes in the IT outsourcing literature. First, while the literature is predominantly concerned with opportunism and consequent ex post hazard costs that contracts can safeguard against, parties to a contract also economize on ex ante transaction costs by their choice of contract type and contract extensiveness. Second, the literature studies the aggregate extensiveness of contracts rather than of distinct contract functions: safeguarding, coordination, and adaptability. Against this backdrop, our research model portrays a nuanced picture that is anchored in the following theoretical interpretation: transaction and relational attributes have implications on specific ex ante and ex post transaction costs, and these implications can be balanced by respective choices in both contract type and the
http://aisel.aisnet.org/misq/vol40/iss1/5

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