Understanding supplier motivation to engage in multiparty performance-based contracts: The lens of Expectancy theory |
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| Institution: | 1. Division of Business, DeSales University, 2755 Station Avenue, Center Valley, PA, 18034, USA;2. School of Business, Robert Morris University, 6001 University Blvd, Moon Twp, PA, 15108, USA;3. Boler College of Business, John Carroll University, 1 John Carroll Blvd, University Heights, OH, 44118, USA;4. School of Business, Georgia Gwinnett College, 1000 University Center Ln, Lawrenceville, GA, 30043, USA;5. G. Brint Ryan College of Business, University of North Texas, 1307 W Highland St, Denton, TX, 76201, USA;1. Department of Supply Chain Management, Eli Broad College of Business, Michigan State University, Travis Kulpa, USA;2. Department of Supply Chain Management, Sam M. Walton College of Business, University of Arkansas, USA;1. Supply Chain Management, Division of Marketing and Supply Chain Management, Price College of Business, University of Oklahoma, USA;2. Supply Chain Management, Department of Supply Chain and Information Management, D''Amore-McKim School of Business, Northeastern University, Boston, MA, 02115-5000, USA;3. Department of Supply Chain Management, W. P. Carey School of Business, Arizona State University, Tempe, AZ, 85281, USA;4. Department of Information Management and E-business, Management School, Xi''an Jiaotong University, Xi''an, China |
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| Abstract: | Research on performance-based contracts (PBCs) has emphasized outcome uncertainty (lack of outcome attributability) as an obstacle to applying such contracts effectively and has investigated possible ways to mitigate this uncertainty. Most studies primarily address dyadic buyer-supplier contracts and the uncertainty that originates in the environment or in buyer behaviour. However, suppliers often also depend on other suppliers and sub-suppliers in the process of outcome creation. Such reciprocal interdependencies between more than two parties cannot easily be addressed through dyadic contracts. This paper examines how effective multiparty PBCs can be designed to align the interests of multiple suppliers. To develop our a priori conceptualisation, we first review the literature and identify the factors that affect suppliers' willingness to engage in PBCs, drawing on Expectancy theory to unravel the motivational effects of rewards. We then use case studies from the construction sector to investigate how these factors apply to multiparty PBCs and identify specific variables that influence supplier motivation in such settings. Based on our findings, we propose that expectancy (the relationship between effort and performance) is enhanced by parties’ joint participation in the planning and control of project activities, their reputation, and specific contractual elements such as the codification of collaboration or reward design in hybrid PBCs. Instrumentality (the link between performance and reward) is primarily affected by the perceived fairness of the reward sharing and codified collaboration, and valence (the relationship between reward and supplier objectives) is mainly influenced by the monetary amounts at stake. |
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