Does contract-based governance lead to or curtail opportunism?

Danyang Zhao, Fang Gu, Long Wei Wong

Research output: Chapter in book / Conference proceedingConference article published in proceeding or bookAcademic researchpeer-review

Abstract

The relationship between contract completeness and partner opportunism is widely discussed in prior interfirm governance literature. However, consensus is lacking regarding whether contract completeness increases ex post opportunism, or such opportunism can be curtailed by contractual or social governance. We believe such an inconclusive state is due to insufficient demarcation between different types of opportunism, and temporal deployment of contracts. In this study, we argue that ex ante contract completeness reduces ex post strong form opportunism while increasing weak form opportunism in a curvilinear manner. Moreover, ex post contractual punishment alleviates the negative impact of strong form opportunism on cooperation performance but worsens the effect of weak form opportunism. Conversely, ex post social punishment alleviates the negative impact of weak form opportunism, suggesting a match between forms of opportunism and types of punishment. Data collected from 227 firms with interfirm cooperation experiences confirm most of the hypotheses. Our findings advance the understanding about contract design and the use of governance mechanisms in interfirm relationships.
Original languageEnglish
Title of host publicationTHE ATHENS INSTITUTE FOR EDUCATION AND RESEARCH Abstract Book
PublisherAthens Institute for Education and Research
ISBN (Print)978-960-598-351-2
Publication statusPublished - Jun 2020
Event18th Annual International Conference on Marketing - Online, Athens, Greece
Duration: 29 Jun 20202 Jul 2020
Conference number: 18

Conference

Conference18th Annual International Conference on Marketing
CountryGreece
CityAthens
Period29/06/202/07/20

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