The relationship of indirect capabilities on perfomance-based contracting: moderating effect of governance complexity

Abstract

This dissertation examines the moderating effect of governance complexity in the relationship between indirect capabilities and managing of performance-based contracting (PBC). The indirect capabilities and governance complexity constructs were examined from relational and contractual aspects. Additionally, this study has derived some patterns of association among the variables in the study. A quantitative approach through a self-administered survey was conducted as a data collection method. The respondents are management personnel from diverse departments in public and private sectors that deal with the outcome or performance-based contracts. The Partial Least Squares Structural Equation Modelling (PLS-SEM) was used to test the hypotheses in the research model. The research findings revealed a significant relationship between relational and contractual capabilities, as components of indirect capabilities, to performance-based contracting. The results also disclosed that relational and contractual governance complexity were found not to moderate the relationship of contractual capabilities and PBC. These findings will enrich current literature by providing an alternative means of approach in the study of performance-based contracting. Theoretically, this dissertation extends the broad understanding of relational and contractual capabilities in managing PBC with the effect of governance complexity. In practical terms, this research provides valuable information for management and organization to further understand the importance of indirect capabilities in implementing and managing performance-based contracts. The finding also provides valuable information for public and private sectors with regard to the extent of contractual and relational governance complexity. The limitations and propositions for future research are also discussed. Future research could explore the effect of other forms of governance and resources that could be beneficial to the study domain. This study also enhanced the perception of performance-based contracts as an outcome-oriented contracting method that binds monetary and non-monetary consequences to the accomplishment of measurable and achievable performance requirements.