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The interplay of contracts and trust: untangling between- and within-dyad effects

Liwen Wang (Shenzhen Audencia Financial Technology Institute (SAFTI), Shenzhen University, Shenzhen, China)
Jason Lu Jin (The City University of Hong Kong Dongguan Research Institute, Dongguan, China)
Defeng Yang (School of Management, Jinan University, Guangzhou, China)

European Journal of Marketing

ISSN: 0309-0566

Article publication date: 2 January 2023

Issue publication date: 17 January 2023

362

Abstract

Purpose

Contracts and trust are two prominent governance mechanisms in buyer–supplier exchanges, yet controversy persists regarding the interplay between contracts and trust. This study aims to provide a new perspective to understand the debate by differentiating between- from within-dyad effects of contracts–trust relationships.

Design/methodology/approach

Based on survey data of 250 Chinese buyer–supplier relationships collected over two time periods, this study used two-level hierarchical linear modeling (HLM) with repeated measures to test the influence of contracts (trust) on trust (contracts) over time.

Findings

The authors find that for major buyer–supplier exchanges, contracts and trust tend to complement each other when comparing across dyads, but they likely substitute for each other in within-dyad settings.

Research limitations/implications

First, to illustrate the dynamic interactions between contracts and trust, this study collected data at two time periods and assumed continuous linear relationships of time with both contracts and trust. Further research should collect multiple waves of data to explore the complex, varying changes that arise over time. Second, this study’s findings are based on buyer–supplier relationships in China, whose unique cultural features may limit the generalizability of the results to other settings.

Practical implications

Channel managers can structure exchanges by devising detailed contracts that align incentives and demonstrate commitment, which helps build trust in a relationship. Channel managers should also pay special attention to the contingency effects of their transactional and relational features.

Originality/value

This study offers the first explicit test of the dynamic contracts–trust relationship, thereby establishing a more refined understanding of interplay between contracts and trust.

Keywords

Acknowledgements

All authors contribute equally to this paper. An earlier shorter version of this paper appeared in the Academy of Management’s Best Paper Proceedings (2018). The authors thank Prof Kevin Zheng Zhou for his constructive comments and insightful suggestions on earlier versions of this paper.

Funding: Liwen Wang gratefully acknowledges the support from the National Natural Science Foundation of China (No. 71902118) and Shenzhen Natural Science Fund (the Stable Support Plan Program 20200812152055001). Jason Lu Jin acknowledges the support from the National Natural Science Foundation of China (No. 72002156). Defeng Yang acknowledges the support from the Fundamental Research Funds for the Central Universities (No. 19JNYH02).

Citation

Wang, L., Jin, J.L. and Yang, D. (2023), "The interplay of contracts and trust: untangling between- and within-dyad effects", European Journal of Marketing, Vol. 57 No. 2, pp. 453-478. https://doi.org/10.1108/EJM-12-2021-0934

Publisher

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Emerald Publishing Limited

Copyright © 2022, Emerald Publishing Limited

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