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The interplay of contracts and trust: untangling between- and within-dyad effects

The interplay of contracts and trust: untangling between- and within-dyad effects Contracts and trust are two prominent governance mechanisms in buyer–supplier exchanges, yet controversy persists regarding the interplay between contracts and trust. This study aims to provide a new perspective to understand the debate by differentiating between- from within-dyad effects of contracts–trust relationships.Design/methodology/approachBased on survey data of 250 Chinese buyer–supplier relationships collected over two time periods, this study used two-level hierarchical linear modeling (HLM) with repeated measures to test the influence of contracts (trust) on trust (contracts) over time.FindingsThe authors find that for major buyer–supplier exchanges, contracts and trust tend to complement each other when comparing across dyads, but they likely substitute for each other in within-dyad settings.Research limitations/implicationsFirst, to illustrate the dynamic interactions between contracts and trust, this study collected data at two time periods and assumed continuous linear relationships of time with both contracts and trust. Further research should collect multiple waves of data to explore the complex, varying changes that arise over time. Second, this study’s findings are based on buyer–supplier relationships in China, whose unique cultural features may limit the generalizability of the results to other settings.Practical implicationsChannel managers can structure exchanges by devising detailed contracts that align incentives and demonstrate commitment, which helps build trust in a relationship. Channel managers should also pay special attention to the contingency effects of their transactional and relational features.Originality/valueThis study offers the first explicit test of the dynamic contracts–trust relationship, thereby establishing a more refined understanding of interplay between contracts and trust. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png European Journal of Marketing Emerald Publishing

The interplay of contracts and trust: untangling between- and within-dyad effects

European Journal of Marketing , Volume 57 (2): 26 – Jan 17, 2023

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References (106)

Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
0309-0566
eISSN
0309-0566
DOI
10.1108/ejm-12-2021-0934
Publisher site
See Article on Publisher Site

Abstract

Contracts and trust are two prominent governance mechanisms in buyer–supplier exchanges, yet controversy persists regarding the interplay between contracts and trust. This study aims to provide a new perspective to understand the debate by differentiating between- from within-dyad effects of contracts–trust relationships.Design/methodology/approachBased on survey data of 250 Chinese buyer–supplier relationships collected over two time periods, this study used two-level hierarchical linear modeling (HLM) with repeated measures to test the influence of contracts (trust) on trust (contracts) over time.FindingsThe authors find that for major buyer–supplier exchanges, contracts and trust tend to complement each other when comparing across dyads, but they likely substitute for each other in within-dyad settings.Research limitations/implicationsFirst, to illustrate the dynamic interactions between contracts and trust, this study collected data at two time periods and assumed continuous linear relationships of time with both contracts and trust. Further research should collect multiple waves of data to explore the complex, varying changes that arise over time. Second, this study’s findings are based on buyer–supplier relationships in China, whose unique cultural features may limit the generalizability of the results to other settings.Practical implicationsChannel managers can structure exchanges by devising detailed contracts that align incentives and demonstrate commitment, which helps build trust in a relationship. Channel managers should also pay special attention to the contingency effects of their transactional and relational features.Originality/valueThis study offers the first explicit test of the dynamic contracts–trust relationship, thereby establishing a more refined understanding of interplay between contracts and trust.

Journal

European Journal of MarketingEmerald Publishing

Published: Jan 17, 2023

Keywords: Trust; Contracts; Buyer–supplier exchanges; Asset specificity; Exchange history

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