Series of successive B2B contracts: impact on contract length and rental rate

Shanfei Feng, Trichy V. Krishnan

Research output: Contribution to journalArticleResearchpeer-review

1 Citation (Scopus)

Abstract

Purpose: Companies in the B2B service sector often sign a series of successive contracts instead of one long contract with their vendors. Economic researchers have shown how the lengths of stand-alone contracts are influenced by economic factors such as asset specificity and economic volatility, but have not researched into contracts that are part of a continuous series. The purpose of this study was to explore if being a part of a series of contracts influences the length of the focal contract and the rental rate. Design/methodology/approach: The authors use data collected from the oil drilling industry to empirically test their hypotheses. The data set consists of 2,621 contracts involving jack-up rig hiring in the Gulf of Mexico region. Findings: The authors empirically show that the series duration affects both the length and rental rate of each constituent contract, even after considering all other plausible economic factors. Specifically, the duration of a series has a positive effect on the length and a negative effect on the rental rate of the constituent contract. Originality/value: Although contract length is as vital as the rent in B2B service transactions, it is rather unfortunate that marketing scholars have not researched much into this topic. The findings offer a new insight into the forces that shape the B2B service contracts and thus help the B2B managers make a better decision in service contracts.

Original languageEnglish
Pages (from-to)1570-1579
Number of pages10
JournalJournal of Business and Industrial Marketing
Volume34
Issue number7
DOIs
Publication statusPublished - 2019

Keywords

  • B2B
  • Contract length
  • Day rate
  • Oil drilling industry
  • Project duration

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