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Trust and collaboration in the aftermath of conflict: the effects of contract structure

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  • Malhotra, Deepak
  • Lumineau, Fabrice

Abstract

Leveraging a longitudinal dataset concerning 102 inter-firm disputes, we evaluate the effects of contract structure on trust and on the likelihood of continued collaboration. We theoretically refine and empirically extend prior research by (a) distinguishing between control and coordination functions of contracts, (b) separating goodwill-based and competence-based trust, and (c) evaluating the effects of contract structure on relational outcomes in the context of disputes. We find that control provisions increase competence-based trust, but reduce goodwill-based trust, resulting in a net decrease in the likelihood of continued collaboration. Coordination provisions increase competence-based trust, leading to an increased likelihood of continued collaboration.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 38358.

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Date of creation: 2011
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Handle: RePEc:pra:mprapa:38358

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Keywords: Trust; Contract; Conflict;

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References

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  1. Nooteboom, B., 1996. "Trust, opportunism and governance: A process and control model," Open Access publications from Tilburg University urn:nbn:nl:ui:12-376064, Tilburg University.
  2. Reuer, Jeffrey J. & Arino, Africa & Mellewigt, Thomas, 2006. "Entrepreneurial alliances as contractual forms," Journal of Business Venturing, Elsevier, vol. 21(3), pages 306-325, May.
  3. Pirrong, Stephen Craig, 1993. "Contracting Practices in Bulk Shipping Markets: A Transactions Cost Explanation," Journal of Law and Economics, University of Chicago Press, vol. 36(2), pages 937-76, October.
  4. Rachelle C. Sampson, 2004. "The Cost of Misaligned Governance in R&D Alliances," Journal of Law, Economics and Organization, Oxford University Press, vol. 20(2), pages 484-526, October.
  5. B. Douglas Bernheim & Michael D. Whinston, 1997. "Incomplete Contracts and Strategic Ambiguity," Harvard Institute of Economic Research Working Papers 1787, Harvard - Institute of Economic Research.
  6. Thomas Mellewigt & Anoop Madhok & Antoinette Weibel, 2007. "Trust and formal contracts in interorganizational relationships - substitutes and complements," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(8), pages 833-847.
  7. Sergio G. Lazzarini, 2004. "Order with Some Law: Complementarity versus Substitution of Formal and Informal Arrangements," Journal of Law, Economics and Organization, Oxford University Press, vol. 20(2), pages 261-298, October.
  8. Mayer, Kyle J. & Teece, David J., 2008. "Unpacking strategic alliances: The structure and purpose of alliance versus supplier relationships," Journal of Economic Behavior & Organization, Elsevier, vol. 66(1), pages 106-127, April.
  9. Ahn, T K, et al, 2001. " Cooperation in PD Games: Fear, Greed, and History of Play," Public Choice, Springer, vol. 106(1-2), pages 137-55, January.
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Cited by:
  1. Dejun Kong, 2013. "Intercultural Experience as an Impediment of Trust: Examining the Impact of Intercultural Experience and Social Trust Culture on Institutional Trust in Government," Social Indicators Research, Springer, vol. 113(3), pages 847-858, September.
  2. Lumineau, Fabrice & Oxley, Joanne, 2012. "Let’s work it out (or we’ll see you in court): litigation and private dispute resolution in vertical exchange relationships," MPRA Paper 38361, University Library of Munich, Germany.
  3. Lumineau, Fabrice & Frechet, Marc & Puthod, Dominique, 2011. "An organizational learning perspective on contract design," MPRA Paper 38360, University Library of Munich, Germany.
  4. Fabrice Lumineau & Marc Fréchet & Dominique Puthod, 2011. "An organizational learning perspective of the contracting process," Post-Print halshs-01019320, HAL.
  5. Lumineau, Fabrice & Henderson, James, 2012. "The influence of relational experience and contractual governance on the negotiation strategy in buyer-supplier disputes," MPRA Paper 38510, University Library of Munich, Germany.
  6. Lumineau, Fabrice & Quelin, Bertrand, 2012. "An Empirical Investigation of Interorganizational Opportunism and Contracting Mechanisms," MPRA Paper 38362, University Library of Munich, Germany.

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