Severe or lenient contracting with friends: the shadow of the past on contractual governance

Longwei Wang (Xi’an Jiaotong University, Xi’an, China)
Xiaodong Li (Xi’an Jiaotong University, Xi’an, China)
Min Zhang (Queen’s Management School, Queen’s University Belfast, Belfast, UK)

Baltic Journal of Management

ISSN: 1746-5265

Publication date: 1 July 2019

Abstract

Purpose

The purpose of this paper is to empirically investigate the effects of cooperation history on contractual governance and the moderating effects of dependence asymmetry on those relationships from the perspective of a weaker firm in emergent economies. Drawing from resource dependence theory and contingency theory, this paper develops a conceptual model to investigate the impact of cooperation history on contractual governance.

Design/methodology/approach

The authors use data from 188 buyer–supplier relationships in China

Findings

The authors find that cooperation history is positively associated with contractual governance when dependence asymmetry is high but negatively associated with contractual governance when dependence asymmetry is low. Furthermore, the negative moderating effect of dependence asymmetry on the relationship between cooperation history and contractual complexity is stronger than the relationship between cooperation history and contract enforcement.

Originality/value

This study contributes to a better understanding of how cooperation history affects contractual governance with respect to the various levels of dependence on partners by incorporating a contingency view. This study also advances the literature on interfirm governance by distinguishing contractual governance into contractual complexity and contract enforcement.

Keywords

Acknowledgements

This work is supported by the National Natural Science Foundation of China (Grant Nos 71472145 and 71390330).

Citation

Wang, L., Li, X. and Zhang, M. (2019), "Severe or lenient contracting with friends: the shadow of the past on contractual governance", Baltic Journal of Management, Vol. 14 No. 3, pp. 370-388. https://doi.org/10.1108/BJM-04-2018-0146

Publisher

:

Emerald Publishing Limited

Copyright © 2019, Emerald Publishing Limited

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