Supply chain collaboration in performance-based contracting: an empirical study

Abstract

PurposeDespite the significant increase in the adoption of performance-based contracting (PBC) in various industries, the primary value drivers of it are still not clear. Considering a lack of empirical evidence for PBC, this study investigates the effects of collaboration between the suppliers to understand the value offerings created in PBC by empirical findings. The purpose of this paper is to examine how supply chain collaboration (SCC) affects PBC benefits.Design/methodology/approachUsing data from 381 survey participants who hold the title of manager or above, hypotheses are tested using structural equation modeling (SEM).FindingsThe results reveal that a strong and positive relationship between SCC and PBC benefits.Research limitations/implicationsOne of the limitations of this research is the collection of data through the Amazon Mechanical Turk online service. The experience level of participants in PBC and the absence of validation of these scale items by industrial experts are other limitations of this study. Nonetheless, the authors found convincing evidence that SCC has a positive effect on PBC benefits.Practical implicationsThe findings highlight the importance of SCC to increase financial, operational and non-financial benefits of PBC for practitioners. The findings offer guidance for managers aiming to increase PBC benefits through SCC.Originality/valueThis is the first study to empirically examine the impact of SCC for better PBC and contributes to the body of knowledge by providing empirical findings in a PBC context. This research also develops valid and reliable instruments to measure PBC benefits through rigorous empirical and statistical analysis that can be used in future studies.