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Trust and formal contracts in interorganizational relationships - substitutes and complements

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  • Thomas Mellewigt

    (Freie Universität Berlin, Institute for Management, Berlin, Germany)

  • Anoop Madhok
  • Antoinette Weibel

    (University of Zurich, Institute of Organization and Administrative Science, Zürich, Switzerland)

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    Abstract

    We hypothesize that trust is a moderator of the direct relationship between control and coordination concerns and contractual complexity. Our results suggest that high trust weakens the positive relationship between control concerns and contractual complexity and reinforces the positive relationship between coordination concerns and contractual complexity. 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) that may help reconcile some divergent perspectives in the literature. Copyright © 2007 John Wiley & Sons, Ltd.

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    Bibliographic Info

    Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

    Volume (Year): 28 (2007)
    Issue (Month): 8 ()
    Pages: 833-847

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    Handle: RePEc:wly:mgtdec:v:28:y:2007:i:8:p:833-847

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    Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976

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    1. Lyons, Bruce R, 1996. "Empirical Relevance of Efficient Contract Theory: Inter-firm Contracts," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 12(4), pages 27-52, Winter.
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    3. Dekker, Henri C., 2004. "Control of inter-organizational relationships: evidence on appropriation concerns and coordination requirements," Accounting, Organizations and Society, Elsevier, vol. 29(1), pages 27-49, January.
    4. Joskow, Paul L, 1987. "Contract Duration and Relationship-Specific Investments: Empirical Evidence from Coal Markets," American Economic Review, American Economic Association, American Economic Association, vol. 77(1), pages 168-85, March.
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    6. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 21(2), pages 297-326, October.
    7. Nooteboom, Bart, 1995. "Trust, opportunism and governance," Research Report, University of Groningen, Research Institute SOM (Systems, Organisations and Management) 95B34, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    8. Scott E. Masten & Stéphane Saussier, 2000. "Econometrics of Contracts : an Assessment of Developments in the Empirical Literature on Contracting," Revue d'Économie Industrielle, Programme National Persée, Programme National Persée, vol. 92(1), pages 215-236.
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    14. Harman, Harry H., 1976. "Modern Factor Analysis," University of Chicago Press Economics Books, University of Chicago Press, edition 3, number 9780226316529, June.
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    Cited by:
    1. Ceci, Federica & Iubatti, Daniela, 2012. "Personal relationships and innovation diffusion in SME networks: A content analysis approach," Research Policy, Elsevier, Elsevier, vol. 41(3), pages 565-579.
    2. Malhotra, Deepak & Lumineau, Fabrice, 2011. "Trust and collaboration in the aftermath of conflict: the effects of contract structure," MPRA Paper 38358, University Library of Munich, Germany.

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