Between Contracts and Trust: Disentangling the Safeguarding and Coordination Effects over the Relationship Lifecycle
DescriptionThe nature of the relationship between contracts and trust as modes of governance remains equivocal. A long-standing controversy has revolved around a simplistic complements-substitutes dichotomy. This study disentangles the safeguarding and the coordination functions of contracts, and theorizes that the contract-trust nexus is contingent upon the relationship phase throughout the relationship lifecycle. Specifically, we argue that contracts substitute trust in the exploratory phase in which firms are mainly concerned about the equity of cooperation, and complement trust in the expansion phase where the major relational concern becomes efficiency. In the mature phase in which the major relational concern is the maintenance of the relationship, the safeguarding function of contracts is replaced by trust, while the coordination function remains, complementing trust. Overall, we provide new insights into when and how contracts complement or substitute trust throughout the relationship lifecycle.
|Effective start/end date||1/01/17 → …|
- contracts , trust , relationship lifecycle , transaction cost economics , relational contract theory