The organizational governance of work relationships between employment and self-employment

The key argument of this article is that firms have established governance structures based on markets, hierarchies and self-enforcing relational contracts so that they are able to keep a substantial amount of control despite of sourcing out labour. Furthermore, we argue that such hierarchical forms of outsourcing produce dependency. Using empirical evidence of various industries in Italy and Austria, it is demonstrated that dependency is created, firstly, by the contractual restriction of alternative uses of resources, secondly, by support measures that bind the worker closely to the outsourcing firm, thirdly, by relationship-specific investments made by the worker, and fourthly, by authority elements. Nevertheless, we find that temporal and network embeddedness plays a crucial role in creating “calculative” trust and reducing opportunism from both parties.