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What are the performance implications of peer monitoring in a multiple-supplier context? Grounded in agency and social exchange theories, this study aims to examine how, when, and why peer monitoring works as a crucial control mechanism to reduce opportunism among suppliers.

A conceptual model and research hypotheses are tested using survey data from 246 respondents in 82 supplier groups.

Results suggest that peer monitoring is related positively to perceived deterrence (as mediator) and negatively to opportunism, whereas the mediated relationship is moderated negatively by generalized reciprocity and positively by balanced reciprocity and negative reciprocity.

This study introduces the application of peer monitoring into business-to-business research and shows how it reduces opportunism. Its findings have implications for manufacturers on how to use peer monitoring to control opportunism among multiple suppliers.

Grounded in agency and clan theories, this study aims to examine how, when and why joint liability works as a control mechanism to reduce opportunism among tea supplier groups in China.

Survey data from 82 supplier groups (three respondents per group) were collected.

Joint liability is related positively to peer monitoring (as mediator) and negatively to opportunism, whereas the mediated relationship is moderated positively by group leaders’ perceived legitimate authority and negatively by reciprocity and shared norms.

Opportunism is operationalized as the use of illegal pesticides, the violation of manufacturer–supplier contractual agreements and joint liability, as suppliers’ liability of having the whole group’s seasonal production is rejected by the manufacturer if a single act of opportunism is detected in the group.

Our study demonstrates how and under what conditions the joint-liability mechanism is linked with the reduction of multi-suppliers’ opportunism. We pave the way for future applications of the control mechanism to fields related to inter-organizational governance. Most importantly, we apply Ouchi’s clan theory (1979, 1980) to conceptualize manufacturer–supplier and supplier–supplier relationships in China and provide first-hand evidence to validate its applicability and generalizability to the context. The study also offers insights on network influences in inter-organizational relationships (Gu et al., 2010; Wathne and Heide, 2004) and confirms the important roles of network factors in inter-organizational relationships. In particular, peer monitoring operates as a mediator and normative factors operate as facilitators (moderators) for the joint liability to work as a mechanism to control opportunism in this relationship context.

The purpose of this paper is to investigate the role of joint liability in improving the repayment performance of a microfinance program.

This is a systematic review of the theoretical and empirical literature.

The theoretical literature has shown, using models of peer selection, peer monitoring and peer pressure, that joint liability overcomes both the informational and enforcement failures present in credit markets for the poor. However, the empirical literature does not yield a clear answer on how much of the success of microfinance programs can be attributed to the effect of joint liability alone without considering the effect of other instruments used by microfinance programs. Further, it is seen that joint liability does not work in isolation, but its effect is dependent on social, cultural and economic environment.

An important future research agenda could be to study the roles of different overlapping mechanisms in group lending and to look at their interactions.

The concept of joint liability works well both in the rural and urban areas, but different social, cultural and economic factors should be analyzed before initiating a microfinance program. In developed regions, focus should be on strengthening peer selection and peer monitoring, as information problems are prevalent. In underdeveloped regions, the major problem is of strategic default, so the focus should be on strengthening social sanctions.

Findings can be used for optimal design of credit contracts for the poor.

The paper reviews the existing literature on – “whether and how” – joint liability lending works in inefficient credit markets and comes up with practical implications for the microfinance sector.

The purpose of this paper is to investigate the impact of three types of peer monitoring and punishment tools on the performance of a group contract for the control of agricultural non-point source pollution (ANPSP) in China.

Experimental economics.

All the three tools result in efficiency improvement and show little difference in performance. In addition, they break the theoretical Nash equilibrium of the team entry auction and help to better reveal bidders’ private cost information.

To the authors’ knowledge, this study can be the first laboratory experiment study in the area of ANPSP in China and might provide some beneficial lessons for China’s policy-makers.

This paper aims to offer a theory on optimal group size. To overcome the problems of institutional credit facilities to the poor and marginal people, Joint Liability Group Lending (JLGL) is often considered as a better option. However, the literature in the field is surprisingly silent about the issue of group-size. This paper tries to fill the vacuum in a theoretical framework.

Using a standard theoretical model, this paper shows that even with costless peer monitoring, there exists an upper bound on the size of group, and this upper bound is exactly pinned down by the strength of the social sanction.

This paper shows that under reasonable specification of effort cost, as group size increases, both optimal cooperative effort level and the deviation incentive from that effort level rise monotonically for any individual borrower. Thus, given the strength of social sanction, the rising incentive for deviation uniquely determines the optimal group size even in absence of free riding in peer monitoring.

The theoretical results derived in the paper require empirical verification which is, however, tricky because of the problems associated with quantifying social sanctions.

This paper argues that the group size should be larger in more integrated communities which have better social cohesion among its members.

This paper shows that, for a given extent of joint liability the borrowers need to bear, the group size in joint liability group lending should be designed according to the strength of social sanction prevailing in the society to achieve social efficiency.

The purpose of this paper is to evaluate the role of social capital in a microfinance contract.

Systematic review of the theoretical and empirical literature on the role of social capital in microfinance.

The theoretical literature has shown using models of peer selection, peer monitoring and peer pressure that group lending with joint liability overcomes both the informational and enforcement failures present in credit markets for poor. However findings from the empirical literature conclude that social capital should not be taken as a single concept but should be considered in light of its different aspects which may be having different effects on the performance. For example, the trust between the borrowers, cultural and social homogeneity has been found to have more significant affect on repayment performance in contrast to the incentives due to peer pressure. The groups formed by family members and relatives are consistently been reported to have weakening influence on repayment.

For a same program the effect of social capital on performance can be different for different geographies and different classification of subjects and thus should be studied before initiating a microfinance program in any social setting.

The borrowers should be encouraged to form groups with others who are more trustworthy and not with those they are just having an acquaintance with. The borrowers should be encouraged to come to aid of those who are victims of negative externalities. The positive experiences will lead to reciprocity of actions in future. The borrowers should be discouraged to form groups with family members and relatives.

It analyzes both theoretical and empirical literature by disentangling different aspects of social capital within groups and their effects on group performance.

This study aims to assess the effect of peer evaluations on team-level effort, productivity, motivation and overall team performance.

This study explores the impact of a peer evaluation system on 895 multicultural and transnational global virtual teams (GVTs) composed of 5,852 university students from 130 different countries. The study uses a quasi-experiment in which the group project is implemented under two conditions over two sequential iterations. In the first condition, team members do not receive peer evaluation feedback during the project. In the second condition, participants completed detailed peer evaluations of their team members and received feedback weekly for eight consecutive weeks.

Results suggest that when peer evaluations are used in GVTs during the project, teams show: higher levels of group effort; lower levels of average productivity and motivation; and no clear evidence of improved team performance. Results cast doubts on the benefits of peer evaluation within GVTs as the practice fails to reach its main objective of improving team performance and generates some negative internal dynamics.

The major implication of the study for managers and educators using GVTs is that the use of peer evaluations during the course of a project does not appear to improve objective team performance and reduces team motivation and perception of productivity despite increases in teams’ perceptions of effort and performance.

This study contributes to the scanty literature regarding the impact of peer evaluation systems on group-level dynamics and performance outcomes.

Prior research indicates that incorporating information symmetry into budgeting processes can reduce slack. This study investigates a new budgeting format, Strategic Budgeting, which incorporates information symmetry via mutual monitoring through a “group budget buffer”, or pool, that supports funding non-budgeted expenditures. Department managers must seek approval from other managers to use pooled funds. We compare this budget format to a traditional format, which does not incorporate information symmetry, and investigate differences in spending decisions among managers. The results overwhelmingly show that groups using Strategic Budgeting spent less of a budget excess than those using Traditional Budgeting. The effect of the availability of unspent funds for a subsequent year's budget was also compared, with results indicating that this factor may potentially mitigate benefits gained from information symmetry over time. This study is the first to experimentally examine the effects of this new type of budgeting technique, as compared to Traditional Budgeting, on managerial budgeting behavior.

The purpose of this paper aims to explore how borrower and group‐level characteristics affect repayment decisions of group borrowers by highlighting the case of rural credit cooperatives (RCCs) in Guizhou province in Southwest China.

The Logit model was applied to test the determinants of repayment performance of RCCs' group lending. The authors used the survey data of 245 farm households in Guizhou province, collected in 2008.

The empirical results indicate that there is a serious mismatch between joint liability mechanisms and the social and economic conditions in rural China. Mechanisms such as threatening to withhold defaulters' future loans from RCCs failed to work. In addition, higher household incomes also did not improve repayment performance. However, factors such as a higher degree of acquaintanceship in a group, migrant income, and employment in government agencies, positively improved the chances of repayment.

Group lending is more suitable for poorer areas with few opportunities for migration and limited access to finance. In addition, constructing the trustworthy relationship between micro‐lenders and customers and designing diverse and flexible financial services to meet heterogeneous demands are equally important.

This paper is an attempt to empirically explore the determinants of repayment performance in group lending programs in China. The results provide meaningful policy implications for the government and rural financial institutions.