New Research Examines How Companies Design Contracts

Michel Benaroch, associate dean for research and Ph.D. programs and professor of management information systems, and his co-authors, Yossi Lichtenstein (UCD Dublin) and Lior Fink (Ben Gurion University of the Negev), recently completed a study focused on contract development and how the upfront costs of designing a contract impacts the effectiveness of the contract.

For the first time, Benaroch et al were able to bring together many components of contract development that had not been studied together before, including contract functions — safeguard, coordination and adaptability — upfront and downstream costs and the type of contract – fixed price or time/money.

The study, “Contract Design Choices and the Balance of Ex-Ante and Ex-Post Transaction Costs in Software Development Outsourcing,” confirms that the more time and effort that is spent up front designing the contract, the stronger the contract  is and the better it is at guiding the outsourced work. “Our results may seem like common sense but it’s the first time contract development has been studied empirically and what contract professionals have known for years has been confirmed,” said Benaroch.

To read complete details of the study, visit Whitman’s Research website.