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

Abstract

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

Masschelein, Stijn, The Influence of Control Mechanisms and Uncertainty on Partner Selection and Cooperation (August 16, 2010). AAA 2011 Management Accounting Section (MAS) Meeting Paper. Available at SSRN: https://ssrn.com/abstract=1659983 or http://dx.doi.org/10.2139/ssrn.1659983

Stijn Masschelein (Contact Author)

University of Western Australia ( email )

School of Business
35 Stirling Highway
Crawley, Western Australia 6009
Australia

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