Paper info: Over before it began: how conflicting actor perceptions hinder performance-based contract initiation in service triads
Over before it began: how conflicting actor perceptions hinder performance-based contract initiation in service triads
Joona Keranen, Mervi Vuori, Daniel Prior and Riikka Raukola
Place of Publication
The paper was published at the 35th IMP-conference in Paris, France in 2019.
Performance-based contracting (PBC) has received increased attention in the academic and business press as a strategic approach to foster long-term value co-creation and innovation in supplier-buyer relationships in B2B markets. In general, PBC refers to long-term contractual approaches that aim to deliver specific outcomes instead of individual products and services, and, where payment schedules are tied to realized milestone outcomes. While PBC should provide a strategically aligned and mutually beneficial arrangement for both suppliers and buyers, several studies indicate that in practice, such contracts are often fraught with barriers and tensions that can hinder or completely halt their implementation. At its core, PBC attempts to address information asymmetries by focusing and structuring information sharing activities between partners. Hence, the success of PBC is reliant on clear definitions of actors’ roles, information-sharing processes and on visibility of outcomes (which vary according to partner positions). While prior research has explored information asymmetries in PBC, there has been an overwhelming focus at the dyadic level. Yet, in contemporary B2B markets, PBCs increasingly involve more complex implementation processes that involve service triads. In such triadic relationships, implementing PBC requires a broader understanding of the dynamics between multiple actors. This study explores how information asymmetries emerge in the context of PBC in service triads, and, how they are perceived by different actors. The study integrates earlier research on PBC, buyer-supplier relationships, information and knowledge management with empirical insights from a case study that involves interviews with representatives from a service triad in the forest and paper manufacturing industry.