Management control systems and trust in outsourcing relationships

Langfield‐Smith, Kim; Smith, David A.

doi:10.1016/s1044-5005(03)00046-5

Cited by 358 publications

(391 citation statements)

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“…At the same time, they argue that these mechanisms of governance can be used in combination by organizations; they may partially overlap to configure particular ways of governance forms. Langfield-Smith and Smith (2003) affirmed that informal control is present in every organization simultaneously with formal, explicit controls, whether as outcome controls (market) or behavior controls (hierarchy); and Tessier and Otley (2012) propose that social and technical controls are part of all the various control systems of an organization. Also, Inauen, Osterloh, Frey, and Homberg, (2014) state that management control systems can be seen as packages, i.e., they relate to contingency variables depending on the balance between different types of control systems.…”

Section: Theoretical Background and Hypothesesmentioning

confidence: 99%

“…With regard to transaction characteristics, TCE highlights the frequency of transactions, the uncertainty derived from asymmetric information, and the relation-specific investments that bind the parties and lead to hold-up problems as the main factors to consider in integrating an activity (Dekker, 2004;Eriksson & Laan, 2007;Howell et al, 2010;Langfield-Smith & Smith, 2003).…”

Section: Theoretical Background and Hypothesesmentioning

confidence: 99%

“…Thus, the frequency of relationships reduces the risk of opportunistic behavior (Hill, 1990). After repeated interaction and feedback, good results from previous trustful actions will improve the perceptions of trust and favor successive transactions without excessive formalization (Dyer, 1997;Langfield-Smith & Smith, 2003;Mayer et al, 1995). Prior ties between partners enable the use of less formal governance arrangements (Dekker, 2008) and, in the long run, these will be more economical (Fryxell et al, 2002).…”

Section: Theoretical Background and Hypothesesmentioning

confidence: 99%

“…In fact, frequency (Langfield-Smith & Smith, 2003), relationspecific investments (Faems, Janssens, Madhok, & Van Looy, 2008;Goo & Huang, 2008;Langfield-Smith & Smith, 2003), and information sharing (Faems et al, 2008;Goo & Huang, 2008;Langfield-Smith & Smith, 2003) favor trust and informal controls, and these reduce the need for integrated forms. Although these developments are described as a whole, TCE considers the transaction characteristics and the mechanism of control as different steps in the selection of the governance form (Dekker, 2004;Langfield-Smith & Smith, 2003;Williamson, 1989). Reuver and Bouwman (2012) also highlighted the need to differentiate the economic institution of transaction (market, hierarchy, and hybrid form) and the method of organizing the action (formal and informal controls).…”

Section: Introductionmentioning

confidence: 99%

“…Thus, a number of studies was conducted on the selection of the governance form by examining transaction characteristics (Crandall, Eisenach, & Litan, 2010;Howell et al, 2010;Neumann, 2010;Waterman & Choi, 2011), the definition of the control structure based on the transaction characteristics (Ding, Dekker, & Groot, 2013;Johansson & Siverbo, 2011;Meer-Kooistra & Vosselman, 2000) and the influence of actionorganizing mechanisms on relationship outcomes (Reuver, 2011;Reuver & Bouwman, 2012;Eriksson & Laan, 2007;Langfield-Smith, 2008;Langfield-Smith & Smith, 2003;Şengün & Wasti, 2011).…”

Section: Introductionmentioning

confidence: 99%

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The Mediated Effect of Formal and Informal Control on Governance Forms

López

Diz-Comesaña

2016

Rev. adm. empres.

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The present paper employs the perspective of Transaction Cost Economics (TCE) to analyze the relevance of formal and informal controls in selecting the governance form. The evidence supports the influence of frequency, information sharing and relation-specific investments as a cause of control mechanisms, and the effect of these factors on the choice of the governance form, but there is no evidence about the combined interaction between these variables. The present work proposes that there is a mediation effect of formal and informal norms on the relationship between the TCE variables (frequency, information asymmetry and relation-specific investments) and the governance form. We applied Structural Equation Modelling to companies in the telecommunications sector in Spain. Our results confirm the opposite effect of formal and informal controls on the selection of governance forms and the mediation effect of these mechanisms of control on the selection of the governance form.KEYWORDS | Governance forms, integration, formal control, informal control, transaction characteristics. RESUMO O presente trabalho emprega o ponto de vista da Economia dos Custos de Transação (ECT) para analisar a relevância dos controles formais e informais na seleção da forma de governança. A evidência apoia a influência da frequência, compartilhamento de informações e investimentos específicos como causa dos mecanismos de controle, e o efeito desses fatores sobre a escolha da forma de governança. Entretanto não há nenhuma evidência sobre as interações entre essas variáveis. Este trabalho propõe que existe um efeito de mediação das normas informais e formais sobre a relação entre as variáveis da ECT (frequência, informações assimétricas e investimentos específicos) e a forma de governança. A Modelagem de Equações Estruturais é aplicada a empresas do setor de telecomunicações da Espanha. Os resultados obtidos confirmam o efeito oposto de controles formais e informais e o efeito de mediação dos mecanismos de controle sobre a seleção da forma de governança. PALAVRAS-CHAVE | Formas de governança, integração, controle formal, controle informal, caracterís-ticas da transação. RESUMEN El presente trabajo emplea la perspectiva de la Economía de los Costes de Transacción (ECT) para ana- RAE-Revista de Administração de Empresas | FGV/EAESP

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Section: Theoretical Background and Hypothesesmentioning

confidence: 99%

Section: Theoretical Background and Hypothesesmentioning

confidence: 99%

Section: Theoretical Background and Hypothesesmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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The Mediated Effect of Formal and Informal Control on Governance Forms

López

Diz-Comesaña

2016

Rev. adm. empres.

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NPM's “Ideals” About the Accountability and Control of Outsourced Activities: Tough, But Realizable, Or A Utopian Dream?

Bogt¹

2018

European Policy Analysis

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Based on 25 cases, the accountability and control processes of activities outsourced by municipalities in the Netherlands are analysed. The focus is twofold: on the accountability and control processes between the external party and the municipality, and on the role played by councillors (elected politicians). The research shows that the typical accountability and control relationship in this context is characterised by a low emphasis on outputs. However, detailed financial information and frequent informal contacts between civil servants (on behalf of the Executives) and the external party are very important. Furthermore, the accountability and control relationship with respect to (activities and) outputs seems to be rather loose, also when ‘proper’ output information is available in accounting documents. Finally, trust is crucial in the relationship, a notion which is not advocated by NPM and its underlying principal‐agent theory.

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Outsourcing in Iranian hospitals: Findings from a qualitative study

Raeissi

Sokhanvar

Kakemam

2018

Health Planning & Management

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Outsourcing is used as a strategy to improve efficiency, quality, and satisfaction of beneficiaries in hospitals. This study aimed to determine the reasons for outsourcing, outsourced services, achieved objectives, and outsourcing challenges. This qualitative study was conducted through 58 face-to-face semi-structured interviews with chief executive officers (CEOs), chief financial officers (CFOs), and contracting experts (CEs) in 42 public hospitals in Tehran, Iran. Purposive and snowball sampling techniques were used. Interviews were recorded digitally and transcribed verbatim. Data analysis was performed based on an inductive-deductive approach via MAXQDA-10. The Participants included 26 CEOs, 15 CFOs, and 17 CEs. The most important reasons for outsourcing were divided into four main categories including financial resources and funding, customers, management, and factors related to the hospitals. Accessing to up-to-date knowledge and technology, improving service quality and accountability, focusing on strategic points, reducing workload, and increasing patient satisfaction turned out to be the positive outcomes of outsourcing. Weakness in laws and regulations, monitoring and assessment of an outsourced unit, creating dependency and changing organizational culture, as well as human resource issues were introduced as the main pitfalls and challenges of outsourcing. Based on the results, it was suggested that the hospital managers must attempt to outsource services by realistic analysis of the organization's current status. They should specify the reasons and objectives of outsourcing and make decisions based on outsourcing potentials. By taking the current challenges of outsourcing in Iranian hospitals into account, the authorities can make the most efficient decisions with regard to outsourcing.

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Management control systems and trust in outsourcing relationships

Cited by 358 publications

References 40 publications

The Mediated Effect of Formal and Informal Control on Governance Forms

The Mediated Effect of Formal and Informal Control on Governance Forms

NPM's “Ideals” About the Accountability and Control of Outsourced Activities: Tough, But Realizable, Or A Utopian Dream?

Outsourcing in Iranian hospitals: Findings from a qualitative study

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