Enhancement of the Contract Negotiation Process In Agency Relationships in IT Outsourcing: A model for improving contract negotiations and the emergence of trust between principals and agents in IT outsourcing agency relationships

Henrich, Frank (2020) Enhancement of the Contract Negotiation Process In Agency Relationships in IT Outsourcing: A model for improving contract negotiations and the emergence of trust between principals and agents in IT outsourcing agency relationships. DBA thesis, University of Gloucestershire. doi:10.46289/LKJH9512

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The research aims at establishing an understanding of the influencing factors and their enhancement through a contract enhancement model (CEM) in order to ensure an improved course of contract negotiations between principals and agents in agency relationships in IT outsourcing. The research discusses the phenomenon of hidden actions and their occurrences, challenges and solutions as explained in the agency theory (JENSEN/MECKLING, 1976). The CEM helps to ensure that the phenomenon of hidden actions as well as opportunistic behaviour are reduced and maximation of benefit is given and shared between the parties. To guarantee a better understanding, the research sets the theoretical facts of the agency theory in conjunction with facts of other theories, such as economics and social cognitive science, in order to manifest the content of the CEM and to ensure that the theoretical framework of the research is based on solid grounds. The research contributes to theory and practice. It provides an enhanced approach for solving challenges arising from hidden actions. With the help of the CEM, the research instructs and guides interacting parties in agency relationships in IT outsourcing how to increase the speed, the efficiency and the effectiveness of their contract negotiations to enable them to develop a solid foundation for a long-lasting business relationship, from the very beginning. Previous research has been conducted in the field of enhancing relationships between principals and agents, but such research has focused on enhancing communication and knowledge transfer between the parties (Henrich, 2011). The present research is understood as a continuation of this previous research. As mentioned above, it aims at enhancing contract negotiations by making them more efficient and speeding them up to help principals and agents in agency relationships in IT outsourcing to run through the process of contract negotiations more effectively. Besides focusing on agency theory, the research also draws on literature in the field of outsourcing, trust and information exchange. In the past, various studies have shown that many outsourcing projects have failed to run for a prolonged period or have been interrupted, renegotiated or even terminated (Leimeister, 2010, p. 2). The literature shows that generally research has already contributed to this subject with a wide range of theories about the constitution and characterisation of mutual exchange between organisations (Kuhlmann, 2012, p. 3). Solving the conflict of information asymmetry as described in the agency theory will lead to an increase of total well-being and should be the aspired solution from a utilitarian point of view (Zaggl, 2012, p. 7). Information exchange and trust as further research subjects within this research are interlinked with the behaviour of individuals who are themselves causing an impact on the level of quality of the relationship. A well-functioning exchange of information can reduce costs for information sharing and the involved parties are willing to to share and exchange information more voluntarily if they recognise that information exchange generates a benefit for both parties (Porterfield, 2007, p. 32). Trust on the other hand has the potential to enhance the relationship between principals and agents. Trust is an informal mechanism which often leads to coordinated joint efforts that improve outcomes and help to exceed expectations of what the interacting parties might achieve, acting solely in their own interest (Hoejmose, Brammer & Milington, 2012, p. 616). By enhancing the influencing factors which are understood to be responsible for poor development of trust and a low level of information exchange between the parties in IT outsourcing, the research provides an opportunity to improve the current situation between the interacting individuals in a situation in which both parties are willing to cooperate which each other. The methodological ground for the research is a constructivist approach. The author understands constructivism as an underlying aspect for developing and discussing ideas, norms and identities. This fits in well with the aim of the research. The analysis of the data collection is reflected in the theoretical standards of the grounded theory (GT). Steps such as identifying the substantive research area, collecting data pertaining to the substantive area and using open coding while collecting the data until the core strategy is recognised or selected, have been conducted to allow proper exposure of information and knowledge. Coding has been seen as a first step of data analysis to move away from particular statements to more abstract interpretations of the interview data. In addition to this, a qualitative content analysis according to Mayring alongside with conducting semi-structured expert interviews as a facilitator for collecting the respective data has been conducted. The central idea of the qualitative content analysis approach is to conceptualise the process of assigning categories to text passages as a qualitative interpretive act, but following content-analytical rules to align research interest with general defined behavioural rules for research work. To guarantee a stringent course of the research, text passages of the interviews have been coded and categorised to describe patterns which emerge from the data analysis. To ensure authenticity, data interpretation has been reviewed constantly against the original interview transcripts. Expert interviews ensure that the knowledge of the experts in agency relationships in IT outsourcing can be retrieved and thus this approach represents a systematic basis for data analysis. The classification is based on the possibility of reconstructing identifiable and interpretable statements made by the experts (Neuser & Nagel, 2002, p. 32). They include the goal of ensuring a generation of area-specific and object-related statements. The experts have been selected according to their function and position within the participating firms (Scholl, 2003, p. 4). The interviews are based on a guide with formulated open questions that are based on the respective interview. The use of an interview guide increases the comparability of data and also ensures that the collected data will sustain a structure (Gläder & Laudel, 2006, p. 42). The interviewer’s influence on the content is regulated and controlled by the interview guide. The interview guide has been tested iteratively prior to conducting the interviews to minimise unclear content and to eliminate obstructions. The interviews have been audio recorded and transcribed afterwards. The interviews have been used only for research purposes. All content has been treated anonymously and is kept confidential. All information has been stored securely and deleted when no longer required for research purposes. Participation was voluntary and interviewees have been informed that interviews are conducted as part of a DBA research. Interviewees had the right to withdraw from an interview at any time. Interviews have been conducted until data saturation had been reached. The implemented content analysis is seen as a descriptive method. Disadvantages of the form of analysis may be that data can be insensitive and might not differentiate between meanings. On the one hand, results could be skewed or slanted if the words and their meanings are misinterpreted. On the other hand, the content analysis provides the benefit that it is unobtrusive. Once data is collected and analysed appropriately, data can be corroborated by other researchers making the data reproducible. Therefore, content analysis is understood to be the best choice as a research technique for making inferences by systematically and objectively identifying specified characteristics within the text of the present thesis. Hypotheses have been verified or falsified by the help of pre-defined, measurable values. Data analysis was conducted according to these values to guarantee objectiveness and robustness. To strengthen the CEM and its related content it is considered to prove the validity and the robustness of the CEM by introducing the CEM to a set amount of external persons. They test, review, use and adapt the CEM in practice to obtain more congruency with the theoretical foundation to be able to close the loop between theory and practice. A result of this is that subsequently documents can be analysed and therefore a documentary analysis can manifest the CEM and its theoretical foundation. This will guarantee that the CEM and its theoretical framework can be determined as feasible, practicable and robust in its content. Furthermore, this might ensure that bias and ethics are balanced out to a maximum and personal influence is kept to a minimum. The examination of interdependencies in hidden action behaviour in conjunction with a discussion of the aspects of theoretical evidence on contract negotiation, information exchange and trust shows that an enhancement of these influencing factors contributes to a significantly improved contract negotiation process and information exchange. The independent variables which will be discussed in the present thesis affect the development of interpersonal connections, the information exchange and the development of trust as a trigger for willingness for transparency and openness as well as for trust as the foundation of improving the contract negotiation process in a highly positive way. In particular, trust contributes to reducing hidden actions as well as it increases the feeling of being and acting securely and according to processes and pre-defined agreements. This shows that trust influences hidden actions positively which itself has its source in insecure situations or in one-sided maximisation of each party's own tendency to increase its own well-being. Moreover, the feeling of having security can be understood as a requirement for achieving stability in the respective agency relationship. Nonetheless, trust can be held accountable for providing a feeling of stability and security, and thus leads to a better information exchange between the parties. Based on this assumption it can be stated that due to a better mutual acceptance between the parties caused by jointly pre-defined content and rules, information is shared more easily. This influences the information exchange and as a consequence the development of trust. The improvement of information exchange assesses existing information asymmetries and overcomes these with the effect of minimising the appeal of hidden actions. From the results of the data generation and analysis, guidance as well as a profound perspective for interacting individuals in agency relationships in IT outsourcing can be derived. This provides the grounds for suggestions on improving existing relationships and bringing in emergent relationships efficiently from the beginning. Furthermore, this situation as such creates a foundation for long-term cooperations. This guidance, as a result of the contract negotiation model and its related content, represents the analysis and the improvement of previously unconsidered subject fields and theoretical areas. The results of the examination deliver an approach as well as a good basis for further research, as the theoretical framework together with the empirical examination in principle outlines the dimensions, in which the contract enhancement model can work. However, it needs to be considered that the discussed and developed contract enhancement model needs to be adapted towards the requirements of other business areas when regarded to be used in such business areas. This thesis delivers substantiated data for the research field in which the research was undertaken. With regard to the course of the survey, the evaluation of it makes profound data available, from which further research projects could have a robust starting point.

Item Type: Thesis (DBA)
Uncontrolled Keywords: Agency relationships; IT outsourcing
Subjects: H Social Sciences > HF Commerce > HF5001 Business > HF5717 Business communication
Depositing User: Susan Turner
Date Deposited: 23 Feb 2021 17:15
Last Modified: 23 Feb 2021 17:15
URI: http://eprints.glos.ac.uk/id/eprint/9383

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