The Hidden Cost of Contracts on Relationships and Performance

21 Pages Posted: 21 May 2010

Abstract

Rather than acting as a safeguard, contracts may actually damage relationships. Using field and lab studies, we assessed the effects of contracts on contract formation, implementation, and ultimate outcomes. Studies 1 and 2 showed that the presence of a contract led people to anticipate more contentious interactions, which then led to a reduction in their actual cooperative behavior. Studies 3 and 4 showed that contracts that included sanctions led to poor team performance.

Suggested Citation

Chou, Eileen Y. and Halevy, Nir and Murnighan, John Keith, The Hidden Cost of Contracts on Relationships and Performance. IACM 23rd Annual Conference Paper, Available at SSRN: https://ssrn.com/abstract=1612376 or http://dx.doi.org/10.2139/ssrn.1612376

Eileen Y. Chou (Contact Author)

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

Nir Halevy

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

John Keith Murnighan

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Leverone Hall, 360
Evanston, IL 60208
United States
847-467-3566 (Phone)
847-491-8896 (Fax)

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