An Empirical Investigation of Interorganizational Opportunism and Contracting Mechanisms
Strategic Organization, 2012, 10(1): 55-84
51 Pages Posted: 31 Dec 2011 Last revised: 2 Feb 2016
Date Written: December 31, 2011
This study investigates contracting mechanisms in situations of opportunistic disputes between organizations. We specifically explore the relationships between the formal versus informal nature of opportunism and the formal versus informal nature of contractual governance. We use a unique data set of 102 buyer-supplier disputes to explore in depth different types of opportunism - that is, strong form versus weak form opportunism - and different types of contracting mechanisms - that is, the controlling and coordinating functions of formal contracts and the cooperative and competitive sides of relational contracts. Our detailed empirical analysis suggests distinct relationships between the different contracting mechanisms, the different types of opportunism, and the level of legal fees necessary to deal with the dispute. These findings enable us to derive implications for research on the role of contractual mechanisms in dealing with interorganizational opportunism.
Keywords: opportunism, formal contract, relational contract, legal fees, vertical relationship
JEL Classification: D23, D74, D82, K41, L22, L33
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