Risk perception in performance based contracts and the influence of experience

Purpose In performance-based contracting (PBC), the provider is paid according to outcomes for its customer, and therefore assumes responsibility for customer risks. Previous studies have revealed that risk exposure is a fundamental influencing factor. Thus, the purpose of this paper is to analyze how previous experience with PBC influences the perception of risks. Design/methodology/approach This research is based on a cross-industry study. Factor analysis and discriminant analysis are used to reveal to what extent experience influences PBC risk factors. Findings It is confirmed that risk perception differs significantly according to previous PBC experience. Thus, significant learning effects are identified in the PBC context. Originality/value The findings of this study contribute to identifying PBC risks through the explorative statistical assessment of these PBC risk factors.