Revisiting the Relationship Between Contract Governance and Contractors’ Opportunistic Behavior in Construction Projects

Contracts are crucial for curbing opportunism, a common phenomenon in construction projects. This article differentiates among the contractual mechanisms of obligatoriness, monitoring, and coordination, and studies the relationships between the complexity of the above functions and different types of opportunistic behavior. Using data from 262 clients (i.e., the parties issuing contracts) in the Chinese construction industry, this article reveals that contractual obligatoriness has a negative effect on strong-form opportunistic behavior. At the same time, contractual monitoring and coordination have positive and negative effects, respectively, on weak-form opportunistic behavior. Furthermore, we find that goodwill trust mediates contractual coordination's effect on weak-form opportunistic behavior. This article contributes to both the contract management literature and the interorganizational relationship governance literature by providing more nuanced findings that speak to the debate surrounding the relationship between contractual governance and opportunistic behavior, elaborate the mediation mechanism, and provide insights into the contractual function view. © 2019 IEEE. Personal use of this material is permitted. Permission from IEEE must be obtained for all other uses, in any current or future media, including reprinting/republishing this material for advertising or promotional purposes, creating new collective works, for resale or redistribution to servers or lists, or reuse of any copyrighted component of this work in other work

How managers can build trust in strategic alliances: a meta-analysis on the central trust-building mechanisms

Trust is an important driver of superior alliance performance. Alliance managers are influential in this regard because trust requires active involvement, commitment and the dedicated support of the key actors involved in the strategic alliance. Despite the importance of trust for explaining alliance performance, little effort has been made to systematically investigate the mechanisms that managers can use to purposefully create trust in strategic alliances. We use Parkhe’s (1998b) theoretical framework to derive nine hypotheses that distinguish between process-based, characteristic-based and institutional-based trust-building mechanisms. Our meta-analysis of 64 empirical studies shows that trust is strongly related to alliance performance. Process-based mechanisms are more important for building trust than characteristic- and institutional-based mechanisms. The effects of prior ties and asset specificity are not as strong as expected and the impact of safeguards on trust is not well understood. Overall, theoretical trust research has outpaced empirical research by far and promising opportunities for future empirical research exist

Portfolios of Exchange Relationships: An Empirical Investigation of an Online Marketplace for IT Services

Small firms face distinct problems and opportunities when procuring IT resources. Whereas previous work focused at the level of firm or buyer-supplier dyad, we address portfolios of buyer-supplier relationships at an online marketplace for IT services. Using the portfolio approach, we develop a buyers taxonomy and analyze properties of resulting clusters.Our investigation reveals four clusters of buyers with distinct mixes of long-term and short-term supplier relationships. Although reverse auctions are found to be associated with short-term relationships and negotiations support long-term relationships, buyers in different clusters use the two mechanisms in combination to a different extent.Performance;Buyer-supplier relationships;IT services;Online markets;Outsourcing;Reverse auctions

Contract Design in Inter-Organizational Relationships: Evidence from the U.S. Franchise Systems

This dissertation develops three essays about contract design in interfirm partnerships. Specifically, I develop the first essay, drawing on an asymmetric view of transactions, to understand the effects of asymmetric exchange hazards borne by different parties on contract design at a dyadic level. In the second essay, drawing from the logic of transaction cost economics and research on the “shadow of the future,” I develop hypotheses regarding the interplay between a firm’s transaction-specific factors and the predetermined contract duration that affect the need for complex dispute resolution provisions. In the third essay, going beyond the economic theoretical explanations regarding incentive alignment and safeguard mechanisms of contract design, I further examine how the CEO’s career experience may influence the contract design. The main empirical part of my dissertation relies on data from contracts and disclosed documents in franchise relationships in the U.S. restaurant industry. Taken together, the theoretical arguments and research settings in this dissertation contribute to a better understanding of contracting between firms

Formalization, communication quality, and opportunistic behavior in R&D alliances between competitors

For technology ventures (and also other firms), R&D alliances provide great learning opportunities and access to scarce resources. However, R&D alliances, in particular between competitors, also involve the concomitant threat of opportunistic behavior, which many firms attempt to manage by formalizing the partnership. Yet, prior research provided mixed findings suggesting that formalization alleviates opportunism, fails to do so, or, ironically, even promotes it. The questions of whether and, if so, when formalization can deter opportunism remains topical. This study differentiates two forms of opportunistic behavior, strategic manipulation and knowledge appropriation, and examines how they are affected by formalization per se and in combination with communication quality. Findings from 82 R&D alliances between competitors indicate that extensive formalization promotes opportunistic behavior. In contrast, communication quality mitigates the dysfunctional effect on strategic manipulation and also alleviates both forms of opportunism directly. Most effects vary with the type of opportunistic behavior. Our findings add to the literature by demonstrating a positive formalization–opportunism relationship in the context of R&D alliances and by suggesting that relational governance (communication quality) compensates for the dysfunctional effects of formal governance (formalization), rather than both having complementary relationships. The results also support the call for more research into nuances of opportunism: they show that differentiating forms of opportunism matters for understanding the efficacy of safeguards against opportunism. Managers are warned against over-formalizing alliances, which spurs opportunism. Instead, they should cultivate an atmosphere of open communication while they can still maintain some “healthy distrust.” This attenuates the adverse effects of formalization, which is important since a certain level of formalization is often inevitable in R&D alliances

Antecedents, Consequences And Control Of Opportunistic Behavior In Strategic Networks

In the Strategic Management literature, the problem of cooperation arising from conflicts of interest has been described as the problem of motivation. Under assumptions of self-interest, or its stronger forms (such as opportunism), collectively beneficial outcomes do not result for because of the actions motivated by the self interests of individual members. In this paper, the author presents a host of antecedents that can spur and/or facilitate such opportunistic pursuits in members of a strategic network. The influence of these antecedents has been reflected in the ex-ante and ex-post phases of network life cycle. It is postulated that the problem can be resolved by securing an alignment in partners’ interest which together with alignment in actions contributes to the bottom line through increased ability to yield an integrated response to the adaptation requirements stemming from disturbances in networks’ environment. A detailed discussion been administered on how opportunism can be controlled through formal measures like contracts, TSIs, vertical integration and game theoretic stipulations,  and the informal controls like relational norms, identification, and culmination of trust and commitment

Contractual Governance, Relational Governance: Why Do Firms Continue Drafting Contracts?

Governing relationships effectively is central to marketing channel performance. Relational governance theory singles out two key mechanisms, contracts and norms, and suggests that norms surpass contracts in their ability to minimize opportunistic behaviour. Recent research has disputed that perspective though, by noting the dark side of norms and calling for a renewed perspective on contractual governance. An analysis of existing empirical research on contractual versus relational governance of marketing channels leads into the proposal of four research directions that can help better understand why firms keep drafting contracts

The Effects of Uncertainties on Network Embeddedness and the Mediating Effect of Information Sharing

Conceptual model that both technology and volume uncertainty promote exchange partners to rely on the network norm of information sharing which is the necessary ingredient of the network embeddedness. Data was collected from the 143 manufacturers in high-tech market in which triadic relationships among the manufacturers (seller), their first vendors (first buyers), and the second vendors (customers of the first buyers) in high-tech markets were particularly focused. Results from the structural equation model and multiple regression analysis reveal that while the technological uncertainty has a positive effect on the network norm of information sharing, the volume uncertainty is not statistically significant. In addition, we find that there existsthe mediator effect of the network norm of information sharing in the relation between the uncertainties and the network embeddedness

The dark side of interorganizational relationships:An integrative review and research agenda

Scholars across management fields have paid increasing attention to the dark side of interorganizational relationships. We first summarize the concept of the “dark side” and its manifestations in interorganizational relationships. We then map the main findings on the antecedents, consequences, and moderating factors of the dark-side manifestations. We relate research gaps to opportunities in our integrative framework. Furthermore, we present a research agenda to advance theory on the manifestation characteristics, the entities and their motivations, the temporality issues, and the positive outcomes of dark-side manifestation