The Influence of Control Mechanisms and Uncertainty on Partner Selection and Cooperation
36 Pages Posted: 16 Aug 2010 Last revised: 20 Jun 2012
Date Written: August 16, 2010
This study investigates whether the use of two different control structures (authority and contingent rewards) and different types of uncertainty (firm specific versus market uncertainty) have an impact on partner selection decisions. The results of an experimental study indicate that buyers diversify the risk of firm-specific uncertainty by spreading the transaction more equally over different suppliers only when controlling their supplier by authority but not by rewards. The results also show that with rewards, buyers are more inclined to rely on reciprocal suppliers which leads to more repeated interactions with one favored supplier. This paper informs future studies that control structures determine the success of different selection strategies. This finding can improve current theories on the governance of interfirm transactions.
Keywords: Experimental Markets, Contracting, Control System
JEL Classification: M41, L11
Suggested Citation: Suggested Citation