Ng, Irene C. L., Ding, Xin and Yip, Nick (2012) Outcome-based contracts as a new business model : the role of partnership and value-driven relational assets. Working Paper. Coventry: Warwick Manufacturing Group. (Service Systems Research Group Working Paper Series).

Preview

PDF (Updated version) WRAP_Ng_WP4-Version2.pdf - Submitted Version - Requires a PDF viewer such as GSview, Xpdf or Adobe Acrobat Reader Download (562Kb)

Abstract

The concept of business models has been increasingly discussed in academic literature since the advent of internet and proliferation of e-businesses in the 1990s (Morris, Schindehutte & Allen, 2005). To attract funding, the early “dot.com” companies used the idea of business models to pitch the attractiveness of their proposed business ventures (Shafer, Smith & Linder, 2005). In academic literature on business models, several themes have emerged that are key concepts of a business model. First, value drivers are important elements for businesses and new business models are often a consequence of changes in these value drivers. These are defined as valuecreating activities or transformations that generate revenue for the firm (Chesbrough, 2007). Second, the performance of a company, through the change in such value drivers, is an essential element in a business model. Literature have described performance of business models as that which requires a joined-up, systems-focused and holistic understanding across the firm’s existing resources and capabilities to retain or achieve a competitive advantage in the industry it sits within as environmental conditions change (Wirtz, Schilke & Ullrich, 2010). Third, the formation of successful partnerships is a feature of new business models. This is echoed in strategy literature where the ability to establish strong partnerships as capabilities is recognised as core-competencies (Johnson, Christensen & Kagermann, 2008). According to Demil and Lecocq (2010), the firm’s “value chain of activities” should include the fostering of partnerships as part of the building blocks of a business model. Clearly, business models exhibit a need to be value-driven, partnership focused, and with the unit of analysis centred on the value-creating system which spans boundaries (Zott & Amit, 2010). There is also the need to understand the inter- or intra-organisational activities that contribute to that system, of which revenues are derived from its performance.

Item Type:	Working or Discussion Paper (Working Paper)
Subjects:	H Social Sciences > HF Commerce
Divisions:	Faculty of Science > WMG (Formerly the Warwick Manufacturing Group)
Library of Congress Subject Headings (LCSH):	Business enterprises, Strategic planning, Value, Partnership
Series Name:	Service Systems Research Group Working Paper Series
Publisher:	Warwick Manufacturing Group
Place of Publication:	Coventry
ISSN:	2049-4297
Date:	February 2012
Volume:	Vol.2012
Number:	No.4
Number of Pages:	38
Status:	Not Peer Reviewed
Publication Status:	Published
Access rights to Published version:	Open Access
References:	Amit, R. and C. Zott (2001), “Value Creation in e-Business.” Strategic Management Journal, 22 (6), 493-520. Anderson, E., & Weitz. B. (1992). The use of pledges to build and sustain commitment in distribution channels. Journal of Marketing, 58 (4), 1-14. Anand, B.N., & Khanna, T. (2000). Do firms learn to create value? The case of alliances. Strategic Management Journal, 21, 295-315. Baden-Fuller, C., & Morgan, M.S. (2010). Business models as models. Long Range Planning, 43 (2-3), 156-71. Baines, T., Lightfoot, H., Evans, S, Neely, A., Greenough, R., Peppard, J., Roy, R, Shehab, E, Braganza, A., Tiwari, A. Alcock, J., Angus, J., Bastl, M., Cousens, A., Irving, P., Johnson, M., Kingston, J., Lockett, H., Martinez, V.,Micheli, P., Tranfield, D., Walton I., & Wilson, H. (2007). State-of-the-art in product service-systems. Proc. IMechE Part B: Journal of Engineering Manufacture, 221(10), 1543- 1551. Baron, R., & Kenny, D. (1986). The moderator-mediator variable distinction in social psychological research: conceptual, strategic and statistical considerations. Journal of Personality and Social Psychology, 51(6), 1173-1182. Bellman, R., Clark, C.E., Malcolm, D.G., Craft, C.J., & Ricciardi, F.M. (1957). On the construction of a multi-stage, multi-person business game. Operations Research, 5 (4), 469- 503. Birkinshaw, Morrison, J., A. & Hulland, J. (1995). Structural and competitive determinants of a global integration strategy. Strategic Management Journal, 16, 637-655. Bolton, R.N., Lemon, K.N., & Verhoef, P.C. (2008). Expanding business-to-business customer relationships: Modeling the customer’s upgrade decision. Journal of Marketing, 72, 46-64. Bramwell, J. (2003). What is performance-based building?” In A. Lee, & P.S. Barrett (Eds.), Performance-based Building, First International State of the Art Report, CIB Report 291, The Netherlands: CIB Publication. Brandenburger, A. & Harbone, S. (1996). Value-based business strategy. Journal of Economics and Management Strategy, 5 (1), 5-26. Calson, D.W. & P.L. Perrewe (1999). “The role of social support in the stressor-strain relationship: an examination of work-family conflict. Journal of Management, 25, 513-540. Casadesus-Masanell, R., & Ricart, J.E. (2010). From strategy to business models and onto tactics. Long Range Planning, 43 (2-3), 195-215. Chesbrough, H. & Rosenbloom, R.S. (2002). The role of the business model in capturing value from innovation: Evidence from Xerox Corporation's technology spin-off companies. Industrial and Corporate Change, 11 (3), 529-55. Chesbrough, H. (2007). Why companies should have open business models. MIT Sloan Management Review, 48 (2), 22-28. Chin, W.W., Marcolin B.L., & Newsted, P.R. (2003). A partial least squares latent variable modeling approach for measuring interaction effects: results from a monte carlo simulations study and electronic- mail emotion/adoption study. Information System Research, 14 (2), 189-217. Conger, J.A., & Kanungo, R.N. (1988). The empowerment process: integrating theory and practice. Academy of Management Review, 13 (3), 471-482. Cox, A., & Townsend, M. (1997). Letham as half-way house: A relational competence approach to better practice in construction procurement. Engineering Construction and Architectural Management, 4 (2), 143-158. Creager, A. H., Lunbeck, E., & Norton, W.M. (2007). Science without laws: model systems, cases, exemplary narratives. Durham, NC: Duke University Press. Das, T.K., & Teng, B.S. (2000). A resource-based theory of strategic alliances. Journal of Management, 26 (1), 31-61. Dean, A.M. (2004). Rethinking customer expectations of service quality: Are call centres different? Journal of Service Marketing, 18 (1), 60-77. Deeds, D.L., & Hill, C.W.L. (1996). Strategic alliances and the rate of new product development: An empirical study of entrepreneurial biotechnology firms. Journal of Business Venturing, 11, 42-5. Demil, B., & Lecocq, X. (2010). Business model evolution: In search of dynamic consistency. Long Range Planning, 43 (2-3), 227-46. Dwyer, D.J., & Ganster, D.C. (1991). The effects of job demands and control on employee attendance and satisfaction. Journal of Organizational Behavior, 12, 595-608. Dyer, J.H. (1997). Effective interfirm collaboration: How firms minimise transaction costs and maximise transaction value. Strategic Management Journal, 18 (1), 553-556. Dyer, J.H., & Singh, H. (1998). The relational view: Cooperative strategy and sources of interorganizational competitive advantages. Academy of Management Review, 23 (4), 660- 679. Ehret, M., & Wirtz, J. (2010). Division of labour between firms: Business services, nonownership- value and the rise of the service economy. Service Science 2 (3) 136-145. Evans, S., & Jukes, S. (2000). Improving co-development through process alignment. International Journal of Operations & Production Management, 20 (8), 979-988. Eyring, M.J., Johnson, M.W., & Nair, H. (2008). New business models in emerging markets. Harvard Business Review, 89 (1/2), 88-95. Fornell, C. (1992). A national customer satisfaction barometer: The Swedish experience. Journal of Marketing, 56 (1), 6-21. Fornell, C., & Bookstein, F. (1982). Two structural equations model: LISREL and PLS applied to consumer exit-voice theory. Journal of Marketing Research, 19, 440-452. Fornell, C., & Larker, D.F. (1981). Evaluating structural equation models with unobserved variables and measurement error. Journal of Marketing Research, 18, 39-50. Gambardella, A., & McGahan, A. M. (2010). Business-model innovation: General purpose technologies and their implications for industry structure. Long Range Planning, 43 (2-3), 262-71. Ganster, D.C. (1989). Worker control and well-being: A review of research in the workplace. In S. Sauter, J. Hurrell, & C. Cooper (Eds.), Job Control and Worker Health, (pp. 3-24). Chichester: John Wiley and Sons. Gatignon, H., Tushman, M.L., Smith, W., & Anderson, P. (2002). A structural approach to assessing innovation: Construct development of innovation locus, type, and characteristics. Management Science, 48 (9), 1103-1122. Gefen D., Straub, D.W., & Boudreau, M.C. (2000). Structural equation modeling and regression: Guidelines for research practice. Communications of the AIS, 4(7), 1-77. Gerbing D.W., & Anderson, J.C. (1988). An updated paradigm for scale development incorporating unidimensionality and its assessment. Journal of Marketing Research, 25, 186- 192. Gronroos, C. (2004). The relationship marketing process: Communication, interaction, dialogue, value. Journal of Business & Industrial Marketing, 19 (2), 99–113. Guimaraes, T., & Bond, W. (1996). Empirically assessing the impact of BPR on manufacturing firms. International Journal of Operations & Production Management, 16 (8), 5-28. Gulati, R., & Singh, H. (1998). The architecture of cooperation: Managing coordination costs and appropriation concerns in strategic alliances. Administrative Science Quarterly, 43, 781– 814. Gunasekaran, A., & Yusuf, Y. (2002). Agile manufacturing: A taxonomy of strategic and technological imperatives. International Journal of Production Research, 40 (6), 1357-1385. Hanna V. (2007). Exploiting complementary competencies via inter-firm cooperation. International Journal of Technology Management, 37 (¾): 247-258. Hedman, J., & Kalling, T. (2003). The business model concept: theoretical underpinnings and empirical illustrations. European Journal of Information Systems, 12, 49-59. Heide, J.B., & Miner, A. (1992). The shadow of the future: Effects of anticipated interaction and frequency of contact on buyer-seller cooperation. Academy of Management Journal, 35(2), 265-291. Hoetker. G., & Mellewigt, T. (2008). Choice and performance of governance mechanisms: Matching alliance governance to asset type. Strategic Management Journal, 30, 1025-1044. Hung, R.Y., Chung, T., & Lien, B.Y. (2007). Organizational process alignment and dynamic capabilities in high-tech industry. Total Quality Management, 18 (9), 1023–1034. Johnson, M.W., Christensen, C.M., & Kagermann, H. (2008). Reinventing your business model. Harvard Business Review, 86 (12), 50-59. Jones, G.M. (1960). Educators, electrons, and business models: A problem in synthesis. The Accounting Review, 35 (4), 619-26. Joskow, P.L. (1988). Asset specificity and the structure of vertical relationships: Empirical evidence. Journal of Law, Economics and Organization, 4, 95-117. Kale P., Dyer, J.H., & Singh, H. (2002). Alliance capability, stock market response, and longterm alliance success: The role of the alliance function. Strategic Management Journal, 23 (8), 747-767. Kambil, A., Friesen, G.B., & Sundaram, A. (1999). Co-Creation: A new source of value. Outlook, 2, 38-43. Kanter, R.M. (1994). Collaborative advantage: The art of alliances. Harvard Business Review, July/August. Karasek, R.A. (1979). Job demands, job decision latitude, and mental strain: Implications for job redesign. Administrative Science Quarterly, 24, 285-306. Kim S.H., Cohen, M.A., & Netessine, S. (2007). Performance contracting in after-sales service supply chains. Management Science 53 (12), 1843-1858. Leventhal, L. (2008). The role of understanding customer expectations in aged care. International Journal of Health Care Quality Assurance, 21 (1), 50-59. Leuthesser, L., & Kohli, A.K. (1995). Relational behavior in business markets: Implications for relationship management. Journal of Business Research 34 (3), 221-33. Li, X., & Wang, Q. (2007). Coordination mechanisms of supply chain systems. European Journal of Operational Research, 179 (1), 1-16. Lin, Z., Yang, H., & Arya, B. (2009). Alliance partners and firm performance: Resource complementarity and status association. Strategic Management Journal, 39, 921-940. Macneil, I. R. (1978). Contracts: adjustment of long-term economic relations under classical, neoclassical and relational contract law. Northwestern University Law Review, 72 (1) 854- 942 Madhok, A. (1995). Opportunism and trust in joint venture relationships: An exploratory study and a model. Scandinavian Journal of Management, 11 (1), 57-74. Madhok, A., & Tallman, S.B. (1998). Resources, transactions, and rents: Managing value through interfirm collaborative relationships. Organization Sciences, 9 (3), 326-339. Mansfield, G.M., & Fourie, L.C.H. (2004). Strategy and business models - strange bedfellows? A case for convergence and its evolution into strategic architecture. South African Journal of Business Management, 35(1), 35-44. Magrath, A.J., & Hardy, K.G. (1994). Building customer partnerships. Business Horizons, January/February. Levitt, T. (1960). "Marketing Myopia". Harvard Business Review. Mayer, K.J., & Teece, D.J. (2008). Unpacking strategic alliances: The structure and purpose of alliance versus supplier relationships. Journal of Economics, Behavior, and Organization, 66, 106-127. Morris, M., Schindehutte, M., & Allen, J. (2005). The entrepreneur's business model: Toward a unified perspective. Journal of Business Research, 58 (6), 726-35. Neely, A.D. (2009). Exploring the financial consequences of the servitization of manufacturing. Operations Management Research, 2 (1), 103-118. Nenonen, S., & Storbacka, K. (2010). Business model design: Conceptualizing networked value co-creation. International Journal of Quality and Service Sciences, 2(1): 43-59 Ng, I.C.L., & Nudurupati, S. (2010). Outcome-based service contracts in the defence industry: Mitigating the challenges. Journal of Service Management, 21 (5), 656-674. Ng, I.C.L., Maull, R., & Yip, N. (2009). Outcome-based contracts as a driver for Systems thinking and service-dominant logic in service science: Evidence from the defence industry. European Management Journal, 27 (6), 377-387. Nickerson, J.A., & Zenger, T.R. (2004). A knowledge-based theory of the firm – the problemsolving perspective. Organization Science, 15, 617–632. Normann, R., & Ramirez, R. (1993). From value chain to value constellation. Harvard Business Review, 71(4), 65–77. Nunnally, J.C. (1978), Psychometric theory. (2nd ed.). New York: McGraw-Hill. Nunnally, J.C., & Bernstein, I. (1994), Psychometric theory. (3rd ed.). New York: McGraw Hill. Osterwalter, A., Pigneur, Y., & Tucci, C.L. (2005). Clarifying business models: Origins, present, and future of the concept. Communications of the Association for Information Systems (CAIS), 15, 1-43. Parasuraman, A., Zeithmal, V.A., & Berry, L.L. (1988). SERVQUAL: A multiple-item scale for measuring consumer perceptions of service quality. Journal of Retailing, 64, 12-40. Parasuraman, A., Zeithmal, V.A., & Berry, L.L. (1994). Reassessment of expectations as a comparison standard in measuring service quality: Implications for future research. Journal of Marketing, 58 (January), 111-124. Parkhe, A. (1993). Strategic alliance structuring: A game theoretic and transaction cost examination of interfirm cooperation. The Academy of Management Journal, 36 (4) 794- 829. Paulraj, A., Lado, A.A., & Chen, I.J. (2008). Inter-organizational communication as a relational competency: antecedents and performance outcomes in collaborative buyer-supplier relationships. Journal of Operations Management, 26, 45-64. Pisano, G.P. (2006). Can science be a business? Lessons from biotech. Harvard Business Review, 84 (10), 114-124. Podsakoff, P.M., MacKenzie, S.B., & Podsakoff, N.P. (2003). Common method biases in behavioral research: A critical review of the literature and recommended remedies. Journal of Applied Psychology, 88(5): 879-903. Poppo, L. &, Zenger, T. (2002). Do formal contracts and relational governance function as substitutes or complements? Strategic Management Journal, 23, 707–726. Powell, W.W., Koput K.W., & Smith-Doerr, L. (1996). Inter-organizational collaboration and the locus of innovation: networks of learning in biotechnology. Administrative Science Quarterly, 15 (1), 88-102. Ramirez, R. (1999). Value co-production: Intellectual origins and implications for practice and research. Strategic Management Journal, 20 (1): 49-65. Reich, B.H., & Benbasat, I. (1996). Measuring the linkage between business and information technology objectives. MIS Quarterly, 20 (1): 55-81. Reich, B.H., & Benbasat, I. (2000). Factors that influence the social dimension of alignment between business and information technology objectives. MIS Quarterly, 24 (1): 81-113. Ren, G. (2009). Service business development in manufacturing companies: Classification, characteristics and implications. (Doctoral dissertation, University of Cambridge, 2009). Reuer, J.J., Zollo, M., & Singh, H. (2002). Post-formation dynamics in strategic alliances. Strategic Management Journal, 23, 135–151. Ring, P.S., & Van de Ven, A.H. (1994). Developmental processes of cooperative interorganizational relationships. Academy of Management Review, 19 (1): 90-118. Rodin, J., Rennert, K., & Solomon, S.K. (1980). Intrinsic motivation for control: Fact or friction. In A. Baum & J. Singer (Eds.) Advances in environmental psychology: Vol 2, applications of personal control (pp. 131-148). Hillsdale, NJ: Erlbaum. Schulz, A.J., Israel, B.A., Zimmerman, M.A., & Checkoway, B.N. (1995). Empowerment as a multi-level construct: Perceived control at the individual, organizational and community levels. Health Education Review, 10 (3), 309-327. Seddon, P.B., G.P. Lewis, P. Freeman, and G. Shanks (2004), "The Case for Viewing Business Models as Abstractions of Strategy," Communications of the Association for Information Systems (CAIS), 13 (1), 427-42. Shafer, S.M., Smith, H.J., & Linder, J.C. (2005). The power of business models. Business Horizons, 48 (3), 199-207. Sheridan, K., & Bullinger, N. (2001). Building a solutions-based organization. Journal of Business Strategy, January/February, 37-40. Slack, N., Chambers, S., & Johnston, R. (2004). Operations management (4th ed.). Harlow, England: Prentice Hall Financial Times. Smith, C.S., Tisak, J., Hahn S.E., & Schmieder R.A. (1997). The measurement of job control. Journal of Organizational Behavior, 18 (3), 225-237.
URI:	http://wrap.warwick.ac.uk/id/eprint/44354

Request changes to a record

Available Versions of this Item

• Outcome-based contracts as a new business model : the role of partnership and value-driven relational assets. (deposited 15 Feb 2012 15:37)
  • Outcome-based contracts as a new business model : the role of partnership and value-driven relational assets. (deposited 10 Apr 2012 10:00) [Currently Displayed]

Actions (login required)

View Item