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The impact of trust and contract on innovation performance: The moderating role of environmental uncertainty

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  • Wang, Longwei
  • Yeung, Jeff Hoi Yan
  • Zhang, Min

Abstract

Research into two important control mechanisms for managing the supply chain relationship - contracts and trust - is on the rise. However, our understanding of how they influence innovation in a firm remains rather unclear. Thus, the primary objective of this study is to examine the individual and interactive effects of contracts and trust on firms' innovation performance and the contingent effects of environmental uncertainty on those relationships in China. The empirical results from a survey of Chinese manufacturing firms indicate that there is a positive relationship between trust and firms' innovation performance, an inverted U-shaped relationship between the use of contracts and firms' innovation performance, and that contracts and trust are substitutes. Moreover, we find that environmental uncertainty enhances the effects of trust, but does not influence the impact of contracts on innovation performance.

Suggested Citation

  • Wang, Longwei & Yeung, Jeff Hoi Yan & Zhang, Min, 2011. "The impact of trust and contract on innovation performance: The moderating role of environmental uncertainty," International Journal of Production Economics, Elsevier, vol. 134(1), pages 114-122, November.
  • Handle: RePEc:eee:proeco:v:134:y:2011:i:1:p:114-122
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    References listed on IDEAS

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    Cited by:

    1. Jao-Hong Cheng & Chih-Ming Lee & Mu-Chung Chen, 2013. "Inter-Organizational Relationship and Innovation Performance in Electronic Supply Chains," Diversity, Technology, and Innovation for Operational Competitiveness: Proceedings of the 2013 International Conference on Technology Innovation and Industrial Management, ToKnowPress.
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    3. Huo, Baofeng & Fu, Dijia & Zhao, Xiande & Zhu, Jingwen, 2016. "Curbing opportunism in logistics outsourcing relationships: The role of relational norms and contract," International Journal of Production Economics, Elsevier, vol. 182(C), pages 293-303.
    4. Griessmair, Michele & Hussain, Dildar & Windsperger, Josef, 2014. "Trust and the tendency towards multi-unit franchising: A relational governance view," Journal of Business Research, Elsevier, vol. 67(11), pages 2337-2345.
    5. Martin, Alexander, 2015. "Gesellschaftliche Individualisierung und betriebliche Innovation: Überlegungen zu Gegenstand und Auswirkungen einer überdehnten Instrumentalisierung von Subjektivität in der Arbeitswelt," Flensburger Hefte zu Unternehmertum und Mittelstand 10, Dr. Werner Jackstädt-Zentrum für Unternehmertum und Mittelstand Flensburg.
    6. Ratzmann, Martin & Gudergan, Siegfried P. & Bouncken, Ricarda, 2016. "Capturing heterogeneity and PLS-SEM prediction ability: Alliance governance and innovation," Journal of Business Research, Elsevier, vol. 69(10), pages 4593-4603.
    7. Tamara Keszey, 2015. "The Role of Market Researchers in Managerial Use of Market Research Information," Tržište/Market, Faculty of Economics and Business, University of Zagreb, vol. 27(1), pages 43-56.
    8. Yeung, Kwong & Lee, Peter K.C. & Yeung, Andy C.L. & Cheng, T.C.E., 2013. "Supplier partnership and cost performance: The moderating roles of specific investments and environmental uncertainty," International Journal of Production Economics, Elsevier, vol. 144(2), pages 546-559.
    9. Zhang, Min & Zhao, Xiande & Qi, Yinan, 2014. "The effects of organizational flatness, coordination, and product modularity on mass customization capability," International Journal of Production Economics, Elsevier, vol. 158(C), pages 145-155.
    10. repec:eee:proeco:v:193:y:2017:i:c:p:113-122 is not listed on IDEAS
    11. Mishra, Deepa & Sharma, R.R.K. & Kumar, Sameer & Dubey, Rameshwar, 2016. "Bridging and buffering: Strategies for mitigating supply risk and improving supply chain performance," International Journal of Production Economics, Elsevier, vol. 180(C), pages 183-197.
    12. Du, Juana & Williams, Christopher, 2017. "Innovative Projects Between MNE Subsidiaries and Local Partners in China: Exploring Locations and Inter-organizational Trust," Journal of International Management, Elsevier, vol. 23(1), pages 16-31.
    13. Zhang, Min & Zhao, Xiande & Voss, Chris & Zhu, Guilong, 2016. "Innovating through services, co-creation and supplier integration: Cases from China," International Journal of Production Economics, Elsevier, vol. 171(P2), pages 289-300.
    14. Eriksson, Tor & Qin, Zhihua & Wang, Wenjing, 2014. "Firm-level innovation activity, employee turnover and HRM practices — Evidence from Chinese firms," China Economic Review, Elsevier, vol. 30(C), pages 583-597.
    15. Bouncken, Ricarda B. & Pesch, Robin & Gudergan, Siegfried P., 2015. "Strategic embeddedness of modularity in alliances: Innovation and performance implications," Journal of Business Research, Elsevier, vol. 68(7), pages 1388-1394.
    16. Shahid Rasool & Asif Ayub Kiyani & Fadilah Binti Siali & Hiram Ting & Mahani Mohammad Abdu Shakur, 2017. "Consumer Innovativeness in Consumer - Company Relationship and Mediating Role of Consumer Value: An Empirical Study of Cell Phone Users in Pakistan," International Review of Management and Marketing, Econjournals, vol. 7(1), pages 379-388.
    17. Huo, Baofeng & Ye, Yuxiao & Zhao, Xiande, 2015. "The impacts of trust and contracts on opportunism in the 3PL industry: The moderating role of demand uncertainty," International Journal of Production Economics, Elsevier, vol. 170(PA), pages 160-170.
    18. Hemmert, Martin & Kim, DaeSoo & Kim, Jisun & Cho, BooYun, 2016. "Building the supplier's trust: Role of institutional forces and buyer firm practices," International Journal of Production Economics, Elsevier, vol. 180(C), pages 25-37.
    19. Yang, Qian & Zhao, Xiande & Yeung, Hoi Yan Jeff & Liu, Yanping, 2016. "Improving logistics outsourcing performance through transactional and relational mechanisms under transaction uncertainties: Evidence from China," International Journal of Production Economics, Elsevier, vol. 175(C), pages 12-23.

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