Centre for Technology Management

Taken on trust: the role of contracts in product development collaborations involving small firms

P Fraser, M Gregory, T Horsfall, University of Cambridge, Department of Engineering

Abstract

Much is taken on trust in product development collaborations involving two separate firms. This paper explores the role and perception of contracts when a firm outsources a significant amount of design or development activity to a third party. Data is derived from case studies of ten collaborative development projects involving UK SMEs. The results are discussed in the context of an emergent collaboration maturity model. A formal contract was not always in place at the outset and some projects did not have one at all. It would appear that simply having a contract is not in itself a sign of maturity, rather it is the attitude to the contract which is significant, along with the presence of goodwill trust. With new partners, there is scope for initial misunderstanding, but increased value is especially felt with follow-on projects, which benefit from an increasing sense of dependability and trust.