Trust and Formal Contracts in Interorganizational Relationships - Substitutes and Complements
38 Pages Posted: 16 Nov 2004
Date Written: September 24, 2004
Abstract
We hypothesize that trust is a moderator of the direct relationship between control and coordination concerns and the extent of contracting. Our results suggest that high trust weakens the positive relationship between control concerns and the extent of contracting, but reinforces the positive relationship between coordination concerns and the extent of contracting. In other words, trust functions at one and the same time as a substitute for contracting (regarding control concerns) as well as a complement of contracting (regarding coordination concerns). By highlighting the dual role of contracts (i.e. a controlling and coordinating function) and the moderating role of trust in this regard, our paper provides a new focus to the current discussion on the relationship between trust and contracts (i.e. substitutes or complements), one that may help reconcile some divergent perspectives in the literature.
Keywords: Trust, contracts, governance, alliances, transaction costs, resource based view
JEL Classification: D23, L14, L20
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
When Do Research Consortia Work Well and Why? Evidence from Japanese Panel Data
By Lee Branstetter and Mariko Sakakibara
-
Contractual Heterogeneity in Strategic Alliances
By Africa M. Arino and Jeffrey J. Reuer
-
Do Prior Alliances Influence Contract Structure? Evidence from Technology Alliance Contracts
-
Partner Selection and Governance Design in Interfirm Relationships
-
By John Hagedoorn and Geerte G. Hesen
-
Capabilities, Transaction Costs and Firm Boundaries: A Dynamic Perspective and Integration
By Nicholas Argyres and Todd Zenger
-
Trust and Formal Control in Interorganizational Relationships
By Rosalinde Klein Woolthuis, Bas Hillebrand, ...