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This paper constructs a contract-theory model to investigate how an MSSP’s (Managed Security Service Provider) operating characteristics of cost efficiency, multiple clients, security externality and firms’ information nature affect the MSSP’s strategic decisions, including the contract structure and the optimum investment level for firms. The analysis shows that firms’ information nature, either complementary or substitutable, plays a crucial role in influencing an MSSP’s decisions. First, the MSSP tends to provider a contract with a lower refund and exert a lower security investment level when the degree of complementation is higher while tending to provider a contract with a higher refund and exert a higher security investment level when the degree of substitution is higher. Second, there is a lot of differences that how the security externality affects the decisions of the MSSP who serves complementary firms and that who …