Between Contracts and Trust: Disentangling the Safeguarding and Coordination Effects over the Relationship Lifecycle

Project: Research

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Description

The nature of the relationship between contracts and trust as modes of governanceremains equivocal. A long-standing controversy has revolved around a simplisticcomplements-substitutes dichotomy. This study disentangles the safeguarding and thecoordination functions of contracts, and theorizes that the contract-trust nexus iscontingent upon the relationship phase throughout the relationship lifecycle. Specifically,we argue that contracts substitute trust in the exploratory phase in which firms aremainly concerned about the equity of cooperation, and complement trust in theexpansion phase where the major relational concern becomes efficiency. In the maturephase in which the major relational concern is the maintenance of the relationship, thesafeguarding function of contracts is replaced by trust, while the coordination functionremains, complementing trust. Overall, we provide new insights into when and howcontracts complement or substitute trust throughout the relationship lifecycle.

Detail(s)

Project number9042417
Grant typeGRF
StatusFinished
Effective start/end date1/01/1715/06/20

    Research areas

  • contracts , trust , relationship lifecycle , transaction cost economics , relational contract theory