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Beyond intentional trust: supplier opportunism and management control mechanisms in public sector procurement and contracting

Author

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  • Lonsdale, Chris
  • Sanderson, Joe
  • Watson, Glyn
  • Peng, Fei

Abstract

We test an argument, drawn from transaction cost economics, that an assumption of intentional trust should be replaced with one of supplier opportunism in public sector procurement and contract management. We use structural equation modelling to evaluate quantitative evidence from 180 public and private sector buyers on the perceived effectiveness of various management control mechanisms aimed at restraining supplier opportunism. Our findings suggest that supplier opportunism is potentially a problem and that certain procurement and contract management mechanisms can assist buying organisations in moderating that opportunism. This supports arguments in favour of a ‘cautious approach’ to procurement and contract management.

Suggested Citation

  • Lonsdale, Chris & Sanderson, Joe & Watson, Glyn & Peng, Fei, 2016. "Beyond intentional trust: supplier opportunism and management control mechanisms in public sector procurement and contracting," MPRA Paper 76094, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:76094
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    References listed on IDEAS

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    5. David P. Baron & David Besanko, 1987. "Monitoring, Moral Hazard, Asymmetric Information, and Risk Sharing in Procurement Contracting," RAND Journal of Economics, The RAND Corporation, vol. 18(4), pages 509-532, Winter.
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    Cited by:

    1. Peng, Fei & Anwar, Sajid & Kang, Lili, 2020. "Institutional monitoring, coordination and corporate acquisitions in China," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).
    2. Peng, Fei & Kang, Lili & Yang, Xiaocong, 2014. "Institutional Monitoring, Coordination and Acquisition Decision in Chinese Public Listed Companies," MPRA Paper 63746, University Library of Munich, Germany.

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    More about this item

    Keywords

    procurement; contract management; intentional trust; opportunism;
    All these keywords.

    JEL classification:

    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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