Trust and Formal Contracts in Interorganizational Relationships - Substitutes and Complements

38 Pages Posted: 16 Nov 2004

See all articles by Anoop Madhok

Anoop Madhok

York University - Schulich School of Business

Thomas Mellewigt

Free University of Berlin (FUB)

Antoinette Weibel

University of Zurich - Faculty of Economics, Business Administration and Information Technology

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

Madhok, Anoop and Mellewigt, Thomas and Weibel, Antoinette A., Trust and Formal Contracts in Interorganizational Relationships - Substitutes and Complements (September 24, 2004). Available at SSRN: https://ssrn.com/abstract=611161 or http://dx.doi.org/10.2139/ssrn.611161

Anoop Madhok

York University - Schulich School of Business ( email )

470 Keele Street
Toronto, ON M3J 1P3
Canada
416-736-2100 x20578 (Phone)

HOME PAGE: http://research.schulich.yorku.ca/faculty-profile-details.jsp?id=87&tab=0

Thomas Mellewigt

Free University of Berlin (FUB) ( email )

GARYSTR.21
Berlin, 14195
Germany

Antoinette A. Weibel (Contact Author)

University of Zurich - Faculty of Economics, Business Administration and Information Technology ( email )

Plattenstrasse 14
Z├╝rich, 8032
Switzerland

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