IT-contracts in an Innovation Perspective: Risks and Gains

Elizabeth Ha Linh le Dang & Lise Preston Frederiksen

Student thesis: Master thesis

Abstract

The purpose of the following thesis is to examine how economic gains and risks should be allocated most optimal with respect to strategic contracting for the contract parties to reach relational rents. Further, the project will shed light on why most firms, today, choose to draft contracts using the conventional method rather than embrace the possibilities of strategic contracting. The conventional method’s prime focus is to regulate rather than maintain sustainable relations among the parties. As result of this multiple firms end up spending large sums on negotiations all the way to court-settling. As a consequence, ties have been broken, thus these firms will have to try to establish new relations, which spirals into a continuous circle.
As strategic contracting is based on the fundamental condition of risk and gain sharing with focus on relational rents, firms can save a significant amount on expenses ex post. The theory new-institutional has been used during the thesis, which result in the actors are partially rational, thus their inabilities to predict all future events are also a significant factor when choosing strategies. Proportionate to the fast-growing IT-industry it will be identified which prerequisites firms must meet in order to establish a strategic partnership, which can be affected by both endogenous and exogenous factors. To do so an implementation of Dyer and Singh’s four conditions have been analyzed during the assessment of IT-partnerships. It is found that the most essential when establishing a strategic partnership is the pre-contractual phase. The latter establishment has great effect on the following process, which will be discussed in the proceedings. Furthermore, following chapters combined will give an impression of what the partners must bear in mind when drafting the contract, which have been distinct into an “outer”- and “inner” frame of the agreement.
In relation to innovation it is thus enlightened why partnerships are recommended and vital for firms to develop an innovative solution in the IT-industry. Based on the recommendation it is clear to eye that a shift of paradigm must be taken to secure innovation as well as for the agreement to become a management tool rather than an actual contract. Prime focus is therefore set to be the mutual obligation to communicate to maintain agile in respect to the continuous development within IT. By achieving this the partnership ensure creating the frameworks of innovation and the possibility of reaching relational rents.

EducationsMSc in Commercial Law, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2020
Number of pages112
SupervisorsKim Østergaard