The performance implications of contractual design: toward a configurational perspective

This study sets out to increase our understanding of the performance implications of contracts in interfirm projects in two fundamental ways. First, relying on configurational theories, we conceptually frame contracts as bundles of functional roles that simultaneously influence the governance of interfirm projects and its performance implications. Second, we expect that the importance of particular contractual roles and the interplay between them is likely to vary across different contextual and relational settings. Using a sample of 180 interfirm innovation projects, the findings of this study carry several key theoretical and managerial implications. Whereas prior research has tended to consider the different contractual functions in isolation, our configurational perspective illuminates the relevance of looking at them in concert. Second, this study shows that different settings ask for different contractual configurations. Third, our theoretical and methodological approach allows demonstrating the notion of equifinality in terms of contract design. For managers, our findings indicate managers for interfirm innovation projects should realize that contracts can have different functions and that it is important to consider these contracts in concert. Moreover, whereas a particular contractual configuration can be high-performing in some settings, in can be low-performing in others. Based on these findings we encourage practitioners to move away from the templatization of contractual design.