Effects of Managerial Risk Propensity and Risk Perception on Contract Selection: Revisiting the Risk Neutrality Assumption of Transaction Cost Economics (TCE)

• Main Author: Cevikparmak, Sedat
• Other Authors: Sauser, Brian
• Format: Others
• Language: English
• Published: University of North Texas 2020
• Subjects: Transaction Cost Economics; Contract Selection; Risk Propensity; Risk Perception; Risk Neutrality
• Online Access: https://digital.library.unt.edu/ark:/67531/metadc1707314/

Contract selection is at the forefront of risk management and mitigation, yet it is an underrepresented area of research in supply chain management field as well as the influences of individual-level risk propensity and risk perception on supply chain decision-making processes. This dissertation explores effects of managerial risk propensity and risk perception on contract selection through the theoretical lens of Transaction Cost Economics (TCE), using a vignette-based experimental research design. This body of work introduces both a first-ever systemmigram of TCE in relation to contract selection, and a novel measurement scale for TCE contract typology. Furthermore, this dissertation tests the TCE predictions towards contract selection and explores the moderating role of financial risk propensity and risk perception (cost vs. supplier performance) on contract selection. The main theoretical contribution of this research is the opening of an old debate on the risk neutrality assumption of TCE, by providing empirical evidence that individual-level risk propensity and perception effect contract selection. The practical implications are significant and points out to the need for a better fit between individual-level and firm-level risk propensity.