Paper: Information Technology and Administrative Efficiency in U.S. State Governments – A Stochastic Frontier Approach
While extant literatures discussing IT value in organizations focus mostly on for-profit institution, this paper provide a new perspective to understand how IT system and investment could improve the efficiency of government and public administration. Analyzing a combination dataset from the IT budget data in state governments, the census data on state government expenditures, and a variety of information on public services states provide, the authors measure technical efficiency with a stochastic frontier analysis with a translog cost function and estimate the effect of IT spending on efficiency. The analyses provide evidence for a significantly positive relationship between IT spending and cost efficiency and indicate that on average, all else being equal, a $1 increase in per capita IT budget is associated with $1.13 efficiency gains.
Since state governments have used IT extensively for internal administration and delivery of public services such as education, social welfare, healthcare, and law enforcement, it is critical from both taxpayer perspective and IT investment planning perspective to understand whether the adoption and investment of IT infrastructure indeed generates sufficient value to the public. The authors adopt a stochastic frontier approach with a cost function, whose data are collected from NASCIO and the census data on state government finances, to estimate the relationship between IT spending and cost efficiency of state governments. The authors find that the relationship is positive and statistically significant, suggesting that the higher IT investments, the greater state government efficiency is.
Pang, M.-S., Tafti, A., & Krishnan, M. S. (2014). Information Technology and Administrative Efficiency in U.S. State Governments: a Stochastic Frontier Approach1. MIS Quarterly, 38(4), 1079-A16.
In recent decades, IT has become an indispensable tool for major strategic initiatives in state governments, but whether these efforts improve the administrative efficiency remain is unknown. In order to get a better understanding of IT’s impact on the public sector, this study estimates the relationship between IT spending and cost efficiency in U.S. state government.
IT investments in government organizations can lead to cost efficiency improvements in two ways: reducing human labor and enhancing the productivity of the administrative process; automating digitized business and increasing transparency and accountability in administration. Furthermore, the study proposes three moderating factors from economic, demographic and political environments respectively, specifically, given in the states with more private-sector IT industries or a larger share of rural population or more divided government, the positive of IT would be stronger. Then authors leverage several public data sources and use a two-stage estimation approach to analyze data. Because there is not a collective output measure for state government, and production of public service is exogenous, the study uses cost function and to posit state governments attempt to limit the use of inputs accordingly. In the first stage, they measure the cost efficiency of state governments in a stochastic frontier analysis with a translog cost function; in the second state, they regress the estimated efficiency on IT measures and other exogenous factors that are used in previous literature. The estimated results support all of their hypothesis.
The study offers meaningful policy implication, specifically, the results justify states governments’ investment in IT. It also contributes to the IS by integrating research from IS, political sciences, and public economics, expanding the boundary of IT value research to the public sector.
Pang, M.-S., Tafti, A., & Krishnan, M. S. (2016). Do CIO IT Budgets Explain Bigger or Smaller Governments? Theory and Evidence from U.S. State Governments. Management Science, 62(4), 1020–1041.
There is a fundamental economic debate among the public, the media, and academia as to what is the proper boundary and role of a government in the contemporary economy. Technological development as one of the key factors behind government growth, should be paid more attention. This study is interested in how information technology (IT) investments made by governments affect the size of government spending. More specifically, this paper examines the relationship between IT budgets of a state chief information officer (CIO) and state government size.
Two opposing hypotheses are proposed. One is that IT investments make state administration more efficient, productive, and transparent, leading to a reduction in state expenditures. The other one is that state governments can utilize digital technologies in initiating a new range of public services that would not have been offered without IT and having a greater control over functions that external organizations would otherwise handle, thus increasing government spending.
Using a variety of data on IT spending and state government expenditures, this study finds that greater IT investments made by a state chief information officer (CIO) are associated with lower state government spending. It is estimated that on average, a $1 increase in state CIO budgets is associated with a reduction of as much as $3.49 in state overall expenditures. Dynamic panel-data model is applied the empirical analysis. A series of robustness checks are implemented to provide further evidences and support the hypothesis.
This work contributes to the IS literature by expanding the boundary of IS research on IT and organizational size to the public sector organizations, to which the IS research has not paid as much attention as it has to the business setting.
Pang, M.-S. (2017). Politics and information technology investments in the U.S. federal government in 2003-2016. Information Systems Research, 28(1), 33-45.
Government information technologies (IT) are often plagued by obsolete legacy systems that are expensive to maintain. These systems are often left in place due to a variety of factors including risk adverse employees, lack of IT commitment/consensus across governing parties, and the sheer volume of difficulties associated with replacing or upgrading IT systems so large in scope that are continually in use. Furthermore, there is a wide variation in IT systems and spending across various agencies and bureaus. To further understanding of factors that influence IT spend, Pang (2017) draws from a range of political science, public administration, and information system literature to develop a theoretical understanding to a previously overlooked phenomenon.
Pang hypothesizes that a federal agency’s capacity-building IT investments are associated with (i) legislative approval for the chief executive, (ii) government dividedness, and (iii) ideological characteristics of the agency. A generalized estimating equation analysis, an approach widely employed for estimating panels with a fractional dependent variable, was conducted on panel dataset of 135 federal agencies and bureaus between 2003 and 2016. Results indicated that the there is a significant, positive relationship between the senate’s confirmation of the chief executive and the agency’s IT investments. Also, there is significant support for the notion that federal agencies are less likely to invest in new IT development under a divided government. Finally, there is significant support for the fact that ideologically moderate federal agencies invest more in development, modernization, and enhancement IT spending. These findings indicate that national politics significantly impact IT investments; investment is dependent on securing compelling policy mandates and political legitimacy from Congress. Therefore, it is proposed that Congress pay more attention to and provide more support for IT investments to ensure the IT infrastructure supports the federal government’s goal to be more agile, flexible, and efficient.
Pang, M.-S. and Pavlou, P.A. (2017) “Armed with Technology – Preventing Fatal Shootings by the Police,” A Working Paper.
The trust between the police and the public in many U.S. cities is more acrimonious than ever before since the Chicago shooting of Laquan McDonald. While technology, especial IT, has enhanced human’s decision-making process in many fields, we do not have sufficient knowledge of the effectiveness of these technologies, particularly in terms of their role in affecting the use of lethal force on civilians by the police. This study theorizes how technology use for intelligence analyses and access influences a police officer’s decision to use lethal force.
With a panel data merged of fatal shootings from The Washington Post and killedbypolice.net in 2013-2016, the empirical analyses show that both the use of smartphones and the statistical analyses of crime data by U.S. local police departments are associated with a significant decrease in fatal shootings by the police. The authors then explore the moderating effects and find that the positive effect of technology use is more pronounced for armed suspects and among males, the youth, and minorities.
Specifically, the authors use signal detection theory to construct a decision optimization under uncertain, which can be moderated by the use of technology. To address the unobserved heterogeneity caused by the spatial contagion of crimes and violence. The authors utilize a spatial panel autoregressive GLS Model, which allow the residual of a random effects model spatially correlated, to validate the main hypothesis that the technology can lead to a decrease in fatal shootings by the police. To test the moderating effects in hypothesis 2, the authors conduct subsample analysis with a SUR random effects model.
This study contributes to the Information Systems (IS) literature by 1) demonstrating the significant role of technology use in highly uncertain and violent environments, 2) uncovering the nuanced effects of technology use that vary by gender, age, and ethnicity, and 3) enhancing our understanding of how IT creates value for an organization in uncertain and life-threatening environments.
|Pang et al. (2014, MISQ)||Leting, Jack|
|Pang et al. (2016, Mgt Sci)||Xi|
|Pang (2017, ISR)||Heather|
|Pang and Pavlou (2017)||Joe|
|Cheng, Pang, and Pavlou (2018)||Sid|
P: professor S: students
P: Ph.D. students need a variety of skills, but writing skill may be the most important one. How many time did you spend on the literature review?
S: Reading and writing take a pretty long time.
P: I spent almost 5 hours on writing a 2 pages grant proposal from scratch, but 2 hours were spent on Facebook, Twitter, and some websites. The difficulty in starting writing on a blank page is called “Writer’s block”. Do you have the similar experience and how you overcome it?
S: Before I write, I would think in my mind and organize some ideas, it could help me start writing soon.
S: I would start with small paragraphs.
P: Are there any other strategy to fix “Writer’s block”?
S: For me, talking with others could help me to generate ideas and frame my thought.
S: Making an outline takes a lot of time, and it would be modified several times. I would rather write and don’t think too much.
S: As for me, Mindmap is a good tool to help me build a framework for a paper, it can also catalyze my writing.
M: Right. There are many strategies. I want to recommend a book to you in terms of how to improve writing, <How to Write a Lot>. A good practice is writing every day, even only a small paragraph. Back to the “Writer’s block”, the most difficult part is the start, writing on a blank page. To overcome it, I would go to a Starbuck or an unfamiliar place, then start writing. Because it is said that in a new environment, people would become more productive. Another strategy is writing on Sunday evening. Thirdly, just writing. Because writing is an iterated process, thus do not read any literature, just use my own mind to write and revise it over and over again. You can never expect writing a good article from one shot.
S: Sometimes, surfing the internet during writing is not necessarily a bad thing, I can copy-paste a few useful sentences and paragraphs, they can be used in my article and help me create new ideas.
P: Yes. Another book I want to recommend is <To the Point: A Dictionary of Concise >. Writing a lot doesn’t mean write well. For many journals, they have explicit page length limits. In the near future, you would find it’s more difficult to write a concise paper. However. the trend is that shorter papers are more preferred by editors.
P: Non-native speakers pay more attention to the grammars and expressions, which could be an advantage. Another thing is that Fox school provides proofreading, you can use it to polish your papers.
S: Some reviewers criticize the logical flow in my paper, how to improve that aspect?
P: It’s more like a problem of logic and theory.
S: Think about hamburger, your paper has different layers but you should make the transition as smooth as possible.
P: Ture, and remember, always think from a reader’s view.
Keongtae Kim, Anandasivam Gopal, Gerard Hoberg (2016) Does Product Market Competition Drive CVC Investment? Evidence from the U.S. IT Industry. Information Systems Research 27(2):259-281.
Companies need ideas to keep competency advantage on innovation. Besides the traditional internal R&D investment to gain innovative knowledge, Firms have several avenues available to access such investment from outside thereby complementing traditional R&D. Corporate venture capital (CVC) is one of the outside resources, classified as open innovation. Whether to use CVC to gain innovative knowledge is heterogeneous among companies in different industries. The importance of knowledge and learning is likely to be most relevant in technology-intensive industries where persistent innovation is a key determinant of success. For companies in technology-intensive industries, such as IT industry, a critical factor that might also have a strong incremental influence on the observed intensity of CVC spending is product market competition. This study explores the relationship between product market competition and IT companies CVC investment by answering the following two questions: 1) Does product market competition faced by IT-producing firms lead to higher investments in CVC spending, all else equal? 2)Do CVC investments lead to higher innovation output? If so, is the relationship moderated by the technology leadership of the investing firm?
The authors proposed to measure product market competition using metrics derived from 10-K textual similarity. Clearly, just using OLS to regress CVC spending on product market competition with covariates or fixed effects cannot uncover the causality. The baseline model suffers from omitted variable bias and reverse causality concern. The authors then tried to use GMM for the dynamic panel data to relief the concerns. The results are consistent with the hypothesis even with several robustness checks using other instruments and panel data Heckman analysis, etc. The paper may still suffer sample selection bias due to the sample filtration. The observations remained in the sample are companies are industry leaders and operate at least 10 years from 1997 to 2007, during when the IT industry leaders turned over significantly, the CVC was hot and somewhat abused, and the market competence was becoming more fierce.
This work contributes to the IS literature by 1) examine product market competition, a systemic feature of the IT industry, as one such driver of this shift from internal to external innovation spending; 2) broadening the focus of IS research on competition to include its effects on the use of external innovation; 3) showing that R&D plays a more important contingent role in IT firms than previously acknowledged.
The paper tries to investigate how the diffusion of the internet influences research collaboration within firms.Previous literature has suggested that research collaboration is hampered by the existence of significant coordination costs that increase with team size and that adoption of information technology such as internet lower coordination costs and thus increase returns of collaborative work.However although some works exist as to whether IT adoption helps academic collaboration no such work exists for industrial collaboration.This is the first work to do so.Motivating the hypothesis using prior models of Becker and Murphy(1992) the authors hypothesize that increase in IT investment(here internet adoption) will be associated with an increase in the likelihood of geographically dispersed, multi inventor collaboration relative to collaboration within the same region/single inventor outputs.The data comes from multiple sources including:patenting data from USPTO,R&D data from Compuestat,regional controls from US census county business patterns.The analysis used is a difference in difference framework, comparing the incidence of a collaborative patent in firm-location pair prior to the treatment of basic Internet adoption to the incidence after the treatment .The model is a fixed effects linear probability model The model controls for observable changes in firm-pair conditions,fir-location employment etc which could affect collaboration volume.It also controls for location fixed effects.The diff-in-diff results show that there is a statistically significant increase in the incidence of collaborative patenting for cross-location pairs adopting Internet over the period, relative to non adopters.This however is not the case for same location teams or single inventors.To test the robustness of the findings the paper uses falsification tests and instruments to rule out endogeniety. The results remain robust and consistent.The research tries to answer a debate in previous literature of whether adoption of IT can lead to increase in collaboration due to reduction of coordination costs and managerially has implications for integration of geographically dispersed organizations/long run design of research organizations within firms.
Paper: Kim, Keongtae, Anandasivam Gopal, and Gerard Hoberg. “Does product market competition drive CVC investment? Evidence from the US IT industry.” Information Systems Research 27, no. 2 (2016): 259-281.
The motivation of this paper is to explore how product market competition will affect the propensity for firms to use corporate venture capital (CVC) as a venue for innovations. CVC is defined as minority equity investments by established firms in start-ups, typically alongside traditional venture capitalists (VC). The primary drivers for CVC are knowledge and learning for persistent innovation and product market competition rather than financial returns. The authors collect CVC funding information from the VentureExpert data set, augmented with data from CompuStat and the National Bureau of Economic Research (NBER) patent database. The authors use a novel measure of competition based on 10-K product descriptions-The textual network industry classification (TNIC). TNIC classifications are based on the product market vocabulary in each firm’s 10-K and are updated every year. Firms using similar product market vocabularies are classified as being in the same industry, allowing for a more accurate measure of competition that captures the dynamic nature of the IT industry. The empirical results suggest that firms in competitive markets make higher research and development (R&D) and CVC investments. In addition, the results indicate that increasing product market competition leads to a shift away from internal R&D spending and into CVC. These movements are significantly stronger for technology leaders, i.e., firms with deep patent stocks, in the IT industry. The authors also find that CVC appears to be an effective way of exploiting external knowledge for technology leaders in the IT-producing industry, but not for technology slow starters. CVC investments lead to significantly more patent applications for technology leaders but no appreciable difference for slow starters.
Tiwana, A., Kim, S. K., & Kim, S. K. (2015). Discriminating IT Governance. Information Systems Research, 143(December 2015).
Based on the idea that different types of IT assets must be governed different, the paper examines an interesting research question: how does the interplay between firms’ IT governance choices and departmental peripheral knowledge influence IT strategic agility?
The theoretical foundation is Jensen and Meckling’s theory, the central idea is that decision rights must be colocated with the knowledge needed to make those decisions when the two are not colocated, there are delegation solution and transmission solution. In the IT context, both the delegation and transmission solution should be used, increasing the peripheral knowledge is also important in tandem with IT governance. Then they propose, For the IT apps, which are often uniquely tailored to different functions, JM’s delegation solution could minimize problems like agility-imperiling delays. Then, with more business knowledge, IT unit could better help line functions, which could increase the strategic agility. However, for IT infrastructure decision which requires deep technical expertise and holistic understanding, JM’s delegation solution implies the centralization of IT infrastructure governance is an optimal strategy. In the meantime, with the increase in line function’s technical knowledge, the strategic agility could be promoted.
In order to test these hypotheses, the authors design a survey and collected matched-pair data from senior IT managers and line function managers in 105 U.S firms. Data on IT strategic agility were collected from line function managers, other variables come from IT managers. Constructs in surveys are based on prior literature. After testing their validity, they use Garen’s two-stage econometric techniques to analyze the data. In the first stage, they evaluated the endogeneity concern by Hausman test. In the second stage, they use a three-step hierarchical weighted least squares (WLS) model to test hypotheses.They also solve some main endogeneity concerns. The paper’s main contributions are showing 1. IT governance enhances IT strategic agility only when it is discriminatingly aligned with departments’ peripheral knowledge; 2. governance-contingent nature of which department needs peripheral knowledge.
Tiwana, A., & Kim, S. K. (2015). Discriminating IT Governance. Information Systems Research, 26(4), 656–674.
Strategic IT agility is one important weapon for firms that using IT to consistently create a series of temporary advantages, introducing a new one before rivals could even finish copying the last one. This study asks the question: why are some firms more adept at using IT in their pursuit of strategic opportunities? The belief is that the secret for exploiting IT for strategic agility is how it is governed, i.e., which department makes what IT decisions. This study addresses the research question: How does the interplay between firm’s IT governance choices and departmental peripheral knowledge influence IT strategic agility.
The theoretic foundation is the JM theory that decision rights must be collocated with the knowledge needed to make those decisions. This study develops the idea that firms’ IT governance choices foster IT strategic agility only when their alignment with departments’ peripheral knowledge is discriminating—discriminating in that only a specific department’s peripheral knowledge induces agility for a specific class (apps or infrastructure) of IT decisions; which department has peripheral knowledge must be aligned with which department makes what IT decisions.
Matched-pair data from 105 U.S. firms are collected. All principal constructs using reflective multi-item Likert scales are measured using the firm’s IT function as the unit of analysis. To account for the endogeneity in firms’ IT governance choices, several instrumental variables are used. The two hypotheses about IT app governance and IT infrastructure governance are theoretically support by a three-step hierarchical weighted least squares (WLS) model. This study contributes theoretically to discriminating alignment and governance-contingent value of peripheral knowledge in IT governance literature.
Saldanha, T. J. V., Mithas, S., & Krishnan, M. S. (2017). Leveraging customer involvement for fueling innovation: The role of relational and analytical information processing capabilities. MIS Quarterly, 41(1), 267-286.
By drawing on three streams of literature, customer involvement, innovation, and IS, Saldanha, Mithas, and Krishnan (2017) were able to respond to calls for insight of how IT enables customer-focused innovation. Previous literature had contradictory findings consider in the impact of customers on the innovation process. On one hand, industry leaders, such as Lego and Sony, and researchers have found that customer involvement in the innovation process can be beneficial. On the other hand, some researchers (e.g., Ittner & Larcker, 1997) have found that it can negatively impact innovation by causing the firm to be reactive instead of proactive. Using a combination of data from several sources including InformationWeek and Compustat, Saldanha et al. (2017) were able to empirically demonstrate that congruent IS can complement the relationship between specific types of customer involvement and innovation.
With respect to customer involvement, the extent to which a firm interacts with customers while developing a product (Carbonell et al., 2009), Saldanha et al. (2017) considered two types: information-intensive (ICI) and product-focused customer involvement (PCI). First, ICI considers the information collected on customers via customer opinion and feedback as well as structure mechanisms such as focus groups. To help manage and analyze such large datasets, Analytical Information Processing Capability (APIC) software such as business analytic technologies can be employed by the organization. Second, PCI captures involvement when the customers are engaged by the firm to actively participate in codeveloping products resulting in customers driving product development or custom configurations of products. CRM software can be employed to help manage relationships with customers as captured under Relational Information Processing Capability (RIPC) software. Effectively, results, including those from the original negative binomial models as well as various robustness checks, indicated that RIPC and AIPC complement the link between PCI and ICI respectively and firm innovation.
|Forman and van Zeebroeck (2012)||Sid|
|Tiwana and Kim (2015)||Xi, Leting|
|Kim et al. (2016)||Joe, Jack|
|Saldanha et al. (2017)||Heather|
Tiwana, A. and Kim, S.K. (2015) “Discriminating IT Governance,” Information Systems Research (26:4) pp. 656-674.
Dr. Amrit Tiwana from University of Georgia will join us as a guest speaker “in person” on March 14. His bio is available here – http://www.terry.uga.edu/directory/profile/tiwana/
Please read his paper and prepare for a question to him.
Amrit Tiwana from University of Georgia will be visiting Fox School as a visiting scholar for a week on March 12-16. The department is scheduling his visit, and I invited him to join us in our seminar for 30 minutes on March 14.
If his visit is confirmed, I will add this paper to the reading list for Week 8.
Tiwana, A. and Kim, S.K. (2015) “Discriminating IT Governance,” Information Systems Research (26:4) pp. 656-674.
Note: Students in italics, Prof normal
Why do we go to conferences and introduce our research?
- To get feedback
- To market yourself: your presentation is like a business card, everyone will know you through your research
- It’s signalling: self-branding (see above point), shows you’re a good presenter (e.g. English-speaking skills), technical skills (e.g., PowerPoint skills)
- WHEN GIVING A TALK AT CONFERENCE OR ANOTHER SCHOOL, YOU ARE BECOMING A SALESMAN – think about what a good salesman does in his pitch
Gives intro to John Hopkins talk
- Graph for # of IT outage incidents isn’t the most convincing justification for the study (might want to control for the amount of air travel over those years)
- Don’t start presentation with “$XX-billion-dollar industry” – every industry is big, think of a way to sell a story (use examples that demonstrate the importance of the research)
- Don’t go directly to the theoretical literature review
- If you are selling a product (say a laptop), are you going to start with all the details of the product you are going to sell (e.g., screen resolution, battery life, etc.)? No.
In most conferences, you only have 10-20 minutes. The shorter the time, the more difficult it is to give the talk. How are you going to present your research in only 15 minutes?
- Cut down literature review, but then lit review, methods, results, discussion.
That sounds like a 20-minute talk. In a shorter amount of time focus on ideas, contribution, and motivation. Think about what is the most important aspect of your research (though literature review and methods are important, you don’t have time to introduce these aspects in only 12 minutes)?
- Don’t waste half of your time on robustness checks – might not be interesting for your audience, probably isn’t the key part of your research
- For example, 1/3 of the slide deck is on motivation of the research
- Includes a large number of pictures or graphs
- No more than three lines of text on a slide – the bigger point here, limit your amount of text. Don’t assume the audience will read the text on the slide
- Remember that the audience can’t read and listen to you talk at the same time – if there is too much text on the slide, they will read that instead of listening to you
- Show results with figures and visualization
- Summary of findings is it
You are becoming a salesperson – focus on the important parts that will convenience your audience you are doing important research
- This even holds true in 90-minute job talk. Rule of thumb, you would probably only speak for 40 minutes (and 40 slides) which isn’t enough time to talk about your research details
I expected feedback on my research at conference talks, but I haven’t had much luck.
- I have experienced the same
- It’s really about introducing / marketing yourself and your research – you speak English well, you are an engaging speaker, etc.
- The chance of getting good feedback from a conference increases if it has discussants (e.g., WISE)
- Better to find a few audience members at breaks and ask directly for feedback (e.g., “Thank you for attending my talk. Do you have any feedback or thoughts?”)
Any questions about conferences?
I think it is understandable as faculty to tell stories about research, but PhD students have to demonstrate their skills (e.g. show models to show you have vigorous method skills). My advisor says to focus on the methods and show that I am well trained in those areas
- Think about having back up slides in your deck that have your full methods, tables, etc. Your presentation is all storytelling, pictures, etc. Then when you are done and taking questions, you can pull up your method slides from the back of your deck
- Think about it has having Appendix slides – you have all your details and tables in the back of the deck that you can pull up if questions come up about those areas of the research
- To your advisors point that technical aspect is most important part of the research, that is true to some extent. He is trying to sell you as a rigorous, well-trained person. If that’s the goal, that’s helpful advice.
In my experience, just listing out the robust checks on an Appendix slide is appropriate. Even for method, empirical papers, it can be enough
Different people, even at different conferences, have different tastes.
Traditionally , outsourcing deals require long term contracts between clients and the vendor and this has been a major area of focus of most of the previous literature. This has also lead to frustration on the part of pretensioners who seek sustainable value from outsourcing. The paper focusses on renegotiation of contracts and investigates the role of decision rights delineated ex ante that enable Pareto improving amendments. Specifically, the authors looks at the effect of flexibility provisions, termination of convenient rights and redoployability rights on part of the vendor to areas outside the contract on likelihood of pareto improving amendments against the default outcome of parties completing the contract without ex post renegotiation.
Two empirical challenges had hampered previous studies namely: lack of good data and lack of rigorous identification strategies. The author was able to overcome this problem by using 10-Q, 10-K, and 8-K filings of firms(SEC) coupled with data from press releases, trade and business reports and press releases from client and vendors.The authors use a probit model for their initial analysis to find the probability of presence of Pareto improving amendment of a contract between client and vendor where as the Ivs include decision rights delineated ex ante, the characteristics of the task contracted upon, contractual provisions, vendor specific characteristics and other client characteristics(including other controls). The results show that flexibility provisions, termination for convenience rights, and contractual rights whereby vendors are granted rights to reuse know-how result in Pareto improving amendments. . The results are robust to potential endogeneity of contractual provisions when parties have the feasible foresight and to the possibility of adverse selection in the sample.
The research contributes to literature by bringing in the angle of renegotiations in contractual decisions highlighting the importance of renegotiation design in enabling adaptation ex-post. It also has implications for practice. Few limitations of the analysis include long term knowledge spillovers(due to redeployability) and noncontractual mechanisms of enforcement which may affect ex post renegotiation.