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A comprehensive theoretical framework for sustainable network contracts: Contracting dimensions and Contract

Vivek Kumar Dubey1

  • 1University of Wisconsin-Madison, USA.

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|January 15, 2024
PubMed
Summary

Sustainable network contracts, guided by sustainability principles, are proposed to mitigate supply chain disruptions and improve return on investment (ROI). This research bridges a literature gap by extending contract theory to include sustainability dimensions.

Keywords:
Contract theorySupply chain contractsSupply chain managementSustainable contractsSustainable supply chain

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Area of Science:

  • Supply Chain Management
  • Contract Theory
  • Sustainability

Background:

  • Supply chain disruptions lead to performance failures and poor return on investment (ROI).
  • Existing contract theories lack a focus on sustainability principles in network governance.
  • A gap exists in the literature regarding the theory of sustainable network contracts.

Purpose of the Study:

  • To develop a theoretical framework for sustainable network contracts.
  • To extend existing contract dimensions by incorporating sustainability.
  • To provide a practical framework for managers to evaluate and implement sustainable contracts.

Main Methods:

  • Extended Transaction Cost Economics and Relational Exchange Theory to include sustainability.
  • Proposed a five-step approach and analytical tool for theory building, using costs, benefits, and risks (CBR) factors.
  • Collected interview and cost data, integrated behavioral elements, and used constrained optimization techniques.

Main Results:

  • Developed the sustainable contracting framework (SCF)/theory.
  • Mapped eight distinct contract types onto the CBR-space, considering network externalities and risks.
  • Demonstrated practical application and relevance of sustainable network contracts.

Conclusions:

  • Sustainable network contracts are crucial for mitigating supply chain disruptions and enhancing ROI.
  • The proposed SCF provides a valuable tool for managers to improve contract evaluation and decision-making.
  • The framework aligns buyer and supplier interests, safeguarding network investments through a coordinated sustainable approach.