The relationship between supplier control and competition in public sector outsourcing

The aim of this article is to develop theory and contribute to empirical studies about how the effectiveness of bureaucratic controls in public sector outsourcing is contingent upon supplier competition, and why and how this interaction plays out differently for hard and soft types of outsourced services. In previous inter‐organizational management control (IOMC) research there is a contradiction between theory and empirical results concerning how bureaucratic control and supplier competition interacts in aligning suppliers. While IOMC theory suggests competition reduces the need for bureaucratic control, empirical studies clearly indicate the opposite. We extend previous research and theorizing by differing between the outsourcing of hard and soft types of services and by testing the joint effect of bureaucratic control and competition on supplier alignment. The empirical case for testing theory is outsourcing by competitive tendering in the public sector. We use transaction level data from 166 local government suppliers in Sweden. In accordance with our prediction, the effect of bureaucratic control in aligning suppliers decreases with supplier competition when hard types of services are outsourced. For soft types of services, our results indicate that bureaucratic control is not contingent upon supplier competition. Furthermore, we show that when supplier competition is low the effect of bureaucratic control on supplier alignment is stronger for hard than for soft types of services. These results constitute an important contribution to the central notion of the interplay between bureaucratic control and competition in the IOMC literature.     

Outsourcing with long term contracts: capital structure and product market competition effects

This paper analyzes how capital structure and product market competition affect the firms’ strategic choice between outsourcing with long term contracts and outsourcing to the spot market. When outsourcing to the spot market firms are exposed to price uncertainty, whereas a long term contract allows them to set in advance the outsourcing price. We show that, to the extent that leverage and uncertainty can lead to financial distress costs in bad states of nature, firms may use long term contracts as a risk management device to hedge input price uncertainty. With a monopoly in the final product market, the outsourcing decision involves a trade-off between a positive convexity effect of input price uncertainty under the spot regime and the option to avoid financial distress costs under the long term contract regime. Moreover, product market competition among buyers can lead to an increase in financial distress costs not only for firms outsourcing to the spot market but also for firms outsourcing with a long term contract. We examine the monopolist’s outsourcing decision and derive the equilibrium for an oligopoly, and show that the equilibrium depends on the magnitude of these costs and on the level of efficiency of the supplier.     

Contractual and Accounting Controls in Outsourcing Agreements: Evidence from the Australian Home Loan Industry

The objective of the article is to examine the contract–accounting control relationship in an outsourcing context and, specifically, issues such as the extent to which contracts and accounting are jointly implemented and integrated in managing supplier relationships. Through an exploratory analysis of outsourcing arrangements in the Australian home loan industry, the study finds that the contracts examined provided a broad relationship frame rather than controls that could be utilised to manage the relationship. Also, accounting controls were only implemented once the outsourcing relationship was underway. Finally, accounting controls operated independently of the contract in two of the three cases examined.     

Trade credit and supplier competition

This paper examines how competition among suppliers affects their willingness to provide trade credit financing. Trade credit extended by a supplier to a cash constrained retailer allows the latter to increase cash purchases from its other suppliers, leading to a free rider problem. A supplier that represents a smaller share of the retailer’s purchases internalizes a smaller part of the benefit from increased spending by the retailer and, as a result, extends less trade credit relative to its sales. In consequence, retailers with dispersed suppliers obtain less trade credit than those whose suppliers are more concentrated. The free rider problem is especially detrimental to a trade creditor when the free-riding suppliers are its product market competitors, leading to a negative relation between product substitutability among suppliers to a given retailer and trade credit that the former provide to the latter. We test the model using both simulated and real data. The estimated relations are consistent with the model’s predictions and are statistically and economically significant.     

Foreign institutional ownership externalities and supplier innovation

Many emerging markets allow foreign investment as a way to reform domestic markets. Extant studies have found a positive externality on innovation brought forth by foreign direct investment (FDI); however, we know very little about the externality of another form of foreign investment, ownership by foreign institutional investors (FII), on innovation. In this paper, we document one form of FII externality by showing that foreign institutional ownership of the customer firm results in higher supplier innovation. We also show that the FII externality on supplier innovation is stronger when customers have more influence on the suppliers and when the FIIs can facilitate information flow better. Our findings suggest that the real impact of FII can go beyond the underlying firms, and promoting FII may benefit firms, especially smaller firms in emerging countries that do not directly have foreign ownership.     

Shared services as a new organisational form: Some implications for management accounting

As an alternative approach to outsourcing, the Shared Service Organisation (SSO) model retains support services in-house. By re-locating in specialised sites, and by incorporating characteristics from business divisions, head office and outsourcing, the SSO is a new organisational form that combines a market-style, customer-centred, outlook with in-house management direction and control. Consultants claim that the SSO can reduce costs and improve support service quality, with the additional benefit that both control and knowledge remains located within the hierarchy of the firm.In order to critically review these claims and examine the specific novelty of the SSO, the paper interprets data from a longitudinal case study through the lens of institutional theory. Some implications for management accounting and management accountants are noted.     

Outsourcing Internal Audit Services: An Empirical Study on Queensland Public-Sector Entities

A study of Queensland public-sector entities suggests outsourcing of internal audit services to be extensive (88%), with 51% of respondent agencies adopting co-sourcing and 37% of the agencies fully outsourcing. Results suggest that internal audit outsourcing is largely adopted for non-financial reasons such as lack of technological know-how and service quality rather than financial reasons. Deficiencies of current governance arrangements concerning internal audit outsourcing include (1) a lack of audit committee involvement in outsourcing processes, particularly in co-sourcing entities, and (2) inadequate segregation of duties whereby the same senior management is involved in key arrangements including selection, approval, negotiation and evaluation of contractual performance.     

论公共品的权限问题

地方公共品的供给是个复杂的问题,不仅涉及到地区间利益的分配,也涉及到个体间福利的变化.从空间意义上看,每一公共品既有一定的受益边界,又对应着一定的供给主体.本文通过分析这两者之间的关系,探讨了地方公共品供给达到最优的条件,并对此基础上产生的几种制度安排作了评析.     

Discretionary disclosure in the presence of dual distribution channels

A prevailing view in the disclosure literature is that firms who learn favorable market information are reluctant to disclose it, fearing it will attract new rivals. In this paper, we demonstrate that the presence of dual distribution arrangements, wherein consumers can purchase products either from traditional retail firms or directly from suppliers, can notably alter disclosure incentives. As under prevailing views, a retailer disclosing positive news risks entry by competitors. However, entry shifts the incumbent supplier–retailer relationship: the presence of new competitors leads the supplier to treat its retailer more as a strategic partner, translating into lower wholesale prices. This, in turn, can lead the retailer to willingly share favorable news, since such disclosure invites entry precisely when the retailer stands to benefit most from price concessions. Our results suggest that as dual distribution continues to increase in prominence, firms may be more willing to voluntarily disclose sensitive financial information particularly that which points to high demand for its products.     

论统计信息的生产主体与使用主体的行为关系

虚假统计信息产生的根源在于统计信息的“生产”主体与“使用”主体之间的利益关联关系与隶属关系以及统计体制。“生产”主体与“使用”主体是相对的,两者是可以相互转化的。因此,在对“生产”主体与“使用”主体进行较详细地分类之后,不论哪一类“生产”主体与任何一类“使用”主体之间,只要存在利益关联关系或隶属关系,就可能有虚假统计信息的产生。这是统计制度所带来的,“考核依据”是由被考核对象提供所造成的。     

The control dynamics of outsourcing involving an early-stage firm

Firms in the early stage of their organisational lifecycle experience challenges that shape the adoption of management controls. They are also recognised for their use of outsourcing. However, the accounting research has provided limited insight on how these control challenges and inter-organisational control concerns interact to influence the adoption of specific controls within an outsourcing relationship involving an early-stage firm. Exploration of this gap provides a key motivation for this paper. Contrary to existing management control and organisational science literature, we find a strong preference for new or enhanced action controls. Conversely, we find low levels of interest in result controls by managers within the buyer but not the supplier firm. These preferences influence inter-organisational control adoption within the frame of an incomplete outsourcing contract that emphasises flexibility in terms of relationship exit. Within the limits of a case study methodology, we argue that adoption of inter-organisational controls is shaped by tensions between the control challenges of early-stage firms, the control preferences of managers within these firms and inter-organisational control concerns. These findings have theoretical implications, expanding the Davila et al. [2009. Reasons for management control systems adoption: insights from product development systems choice by early-stage entrepreneurial companies. Accounting, Organizations and Society, 34 (3–4), 322–347] framework and the Merchant [1985. Control in Business Organizations. Boston, MA: Pitman] control typology into an ESF inter-organisational control context.     

医院外包业务的内部控制优化

医院外包业务的规模及费用逐年递增,内部控制不力造成外包业务效益低下已成为目前较为突出的问题。鉴于承包方选择阶段是外包业务开展的重要环节,该阶段有效的内部控制能合理保证外包业务的顺利开展。针对外包业务承包方选择阶段存在的风险,从内部控制的角度进行原因分析,通过引用层次分析法,量化综合评标法的评价过程等达到内部控制优化的目的。     

Worldwide nuclear plant performance revisited : An analysis of 1978–81

Analysis of recent nuclear plant performance, by country and manufacturer, confirms trends and differences in performance identified in the author's previous analysis. The crucial roles of electric utilities and vendors in ensuring high quality of design, construction, operation and maintenance are identified. Evidence is also presented suggesting that technological leadership is passing from the USA to Europe, although Japan may also emerge as an important reactor supplier.     

The decision to outsource risk management services

We apply transaction cost economics to identify factors influencing companies’ decision to internally generate or outsource risk management services. A unique sample is used which combines publicly available data with private information supplied by 281 Australian listed companies. We find that expenditure on research and development, greater technological uncertainty, more competitive environments, more overseas sales and transaction frequency are associated with less outsourcing of risk management services. Uncertainty due to environmental diversity is associated with more outsourcing of risk management services. Companies that outsource risk management services also have lower staff turnover and provide more specialised training and longer contracts for risk management suppliers.     

The effect of supplier industry competition on pay-for-performance incentive intensity

We examine how supplier industry competition affects CEO incentive intensity in procuring firms. Using Bureau of Economic Analysis data to compute a weighted supplier industry competition measure, we predict and find that higher supplier competition is associated with stronger CEO pay-for-performance incentive intensity. This effect is incremental to that of the firm's own industry competition previously documented and is robust to alternative measures of supplier competition and to exogenous shocks to competition. Importantly, we show that performance risk and product margin act as mediating variables in the relation between supplier competition and CEO incentive intensity providing support for the theory underpinning our finding. We document that CEO compensation contracts are used as a mechanism to exploit the market dynamics of upstream industries to a firm's benefit. Our findings are economically important as suppliers provide, on average, 45 percent of the value delivered by procuring firms to the market (BEA, 2016).     

Strategic sourcing: from periphery to the core

As globalization changes the basis of competition, sourcing is moving from the periphery of corporate functions to the core. Always important in terms of costs, sourcing is becoming a strategic opportunity. But few companies are ready for this shift. Outsourcing has grown so sophisticated that even critical functions like engineering, R&D, manufacturing, and marketing can-and often should-be moved outside. And that, in turn, is changing the way companies think about their organizations, their value chains, and their competitive positions. Already, a handful of vanguard companies are transforming what used to be purely internal corporate functions into entirely new industries. Companies like UPS, Solectron, and Hewitt have created new business models by concentrating scale and skill within a single function. As these and other function-based companies grow, so does the potential value of outsourcing to all companies. Migrating from a vertically integrated company to a specialized provider of a single function is not a winning strategy for everyone. But all companies need to rigorously reassess each of their functions as possible outsourcing candidates. Presented in this article is a simple three-step process to identify which functions your company needs to own and protect, which can be best performed by what kinds of partners, and which could be turned into new business opportunities. The result of such an analysis will be a comprehensive capabilities-sourcing strategy. As a detailed examination of 7-Eleven's experience shows, the success of the strategy often hinges on the creativity with which partnerships are organized and managed. But only by first taking a broad, strategic view of capabilities sourcing can your company gain the greatest benefit from all of its sourcing choices.     

Will you survive the services revolution?

Of late, offshoring and outsourcing have become political hot buttons. These o words have been conflated to mean that high-paying, white-collar jobs have been handed to well-trained but less expensive workers in India and other locales. The brouhaha over the loss of service jobs, which currently account for over 80% of private-sector employment in the United States, is not merely an American phenomenon. The fact is that service-sector jobs in all developed countries are at risk. Regardless of what the politicians now say, worry focused on offshoring and outsourcing misses the point, the author argues. We are in the middle of a fundamental change, which is that services are being industrialized. Three factors in particular are combining with outsourcing and offshoring to drive that transformation: The first is increasing global competition, where just as with manufactured goods in the recent past, foreign companies are offering more services in the United States, taking market share from U.S. companies. The second is automation: New hardware and software systems that take care of back-room and front-office tasks such as counter operations, security, billing, and order taking are allowing firms to dispense with clerical, accounting, and other staff positions. The third is self-service. Why use a travel agent when you can book your own flight, hotel, and rental car online? As these forces combine to sweep across the service sector, executives of all stripes must start thinking about arming and defending themselves, just as their manufacturing cousins did a generation ago. This will demand proactive and far-reaching changes, including focusing specifically on customer preference, quality, and technological interfaces; rewiring strategy to find new value from existing and unfamiliar sources; de-integrating and radically reassembling operational processes; and restructuring the organization to accommodate new kinds of work and skills.     

Specific investment,supplier vulnerability and profit risks

We investigate, theoretically and empirically, the impact of relationship-specific investment on suppliers’ profitability and profit risks. In addition to the familiar holdup problem, we explore another facet of specific investment that has received little attention in the literature, namely suppliers’ vulnerability to customer risks. In a theoretical model, we demonstrate that the supplier vulnerability problem implies a negative relationship between the degree of specificity and the expected profit of a supplier, and a positive relationship between the degree of specificity and volatility of the supplier's profit. Using panel data on over 5,000 US firms from 1990 to 2010, our empirical analysis shows the prevalence of the supplier vulnerability problem.     

Shared auditors,social trust,and relationship-specific investment in the supply chain

An auditor common to a supplier and customer may serve an information role, reduce information asymmetry, or mitigate a potential hold-up problem in the supply chain. The information role of shared auditors could be more important in a lax institutional environment where a lack of trust exists between the supplier and customer. Using a sample of listed firms in China from 2009 to 2015, we find that (1) a shared auditor enhances the supplier’s relationship-specific investment (RSI), and (2) this positive association is stronger when the customer is located in a region with lower trust. We also document an incremental effect of a shared audit partner on enhancing the supplier’s RSI in addition to the effect of a shared auditor at the audit firm level. Additional analyses suggest that a shared auditor alleviates information asymmetry between the supplier and customer and hence improves the supplier’s RSI. A shared auditor particularly improves the supplier’s RSI when the customer is limited in its legal protection, which validates the usefulness of this unique research setting (China) for studying the information role of shared auditors. By extending the research on shared auditors and social trust, this paper provides a reference for companies that wish to explore the role of auditors in enhancing RSI in the supply chain.     

湖北省承接国际服务外包的制约因素分析

文章在简要介绍湖北省服务外包产业发展现状的基础上,根据服务外包承接地竞争力影响因素评价标准,从基础因素、企业因素和市场因素三个方面对湖北省承接国际服务外包的制约因素进行了分析.研究发现,湖北省承接国际服务外包存在较多的制约因素,如政府扶持力度不足、知识产权保护体系不完善、劳动力成本的增加、外包企业规模小、外包企业创新能力不足、服务外包中介组织体系不完善、人才流失严重、英语沟通水平低等.最后,从政府和企业两个层面提出了湖北省承接国际服务外包的政策建议,包括政府要加大政策扶持力度、加大知识产权保护力度、完善中介服务体系、改善用人机制、重视英语教育等,企业要不断扩大规模、加强自主创新能力和提高服务质量等.