Suchergebnisse

ABSTRACTTo date, most applications of real options theory (ROT) in outsourcing literature are modeled from the clients' side. Little attention has been paid to vendors' options in outsourcing. In this article, we study outsourcing from the vendors' perspective by analyzing vendors' value of waiting. The contribution of our research to the literature lies in our analysis of a model that compensates for vendors' loss of option to wait since they have to exercise outsourcing contracts at clients' given timing. Such a compensation‐oriented model yields new insights about the vendors' valuation of outsourcing opportunities, and offers important practical guidance to vendors' decision making.

ABSTRACTThis research utilizes real options theory to investigate how to break the winner's curse in contracting through effective contracting mechanisms. We focus on two contracting approaches: flexible price contract and gain‐sharing contract. For reasons of analytical tractability, we first utilize the geometric Brownian motion as the dynamic model to obtain closed‐form solutions to break the outsourcing winner's curse. Subsequently, we extend our model to the mean‐reverting process and provide numerical examples to verify the validity of our closed‐form results, which have not previously been presented in the outsourcing literature. Finally, we provide prescriptions for the problem of the winner's curse in outsourcing.