Contracts, opportunism and trust: self-interest and social orientation

Servitising manufacturers: the impact of service complexity and contractual and relational capabilities

“…Bijlsma-Frankema and Costa (2005) argue that formal control through contracts depends on three underlining conditions -codification, monitoring and safeguards -which are seldom met in an inter-organisational relationship. In practice it is rarely visible or practical to write complete contracts because of the complex nature of product-service offerings, asymmetric information situations andsubstantial costs and time efforts (Lyons and Mehta, 1997). Inter-organisational relationships are mostly governed by incomplete contracts characterised by some degree of uncertainty that makes these contracts unenforceable in their entirety (Roehrich and Lewis, 2010).…”

Trust, Contract and Relationship Development

“…conditional) types, the types that require and consume most in the way of physical and economic resources.' Taking this 'dark side' of contracts into consideration, we may conclude that it may not always be desirable to completely specify and enforce a contract (Fehr et al 2001;Fehr and Schmidt 2002;Lyons and Mehta 1997;Chen 2000), especially since the negative effects may not only materialize in the present, but also in future relationships. If few alternative partners are available, the opportunity costs of this may be very high; also, by indirect reputation, effects.…”

“…On the one hand, studies found evidence that high trust and formal control are found together and can be conceptualized as complementary mechanisms in inter-firm relationships (Anderson and Narus 1990;Powell 1990;Zaheer and Venkatraman 1995;Poppo and Zenger 2002;Luo 2002) or found trust to be a precondition for contracts (Larson 1992;Ring and Van de Ven 1994). On the other hand, studies found evidence that trust was reducing the need for contracting and monitoring and hence trust can be conceptualized as substituting for formal control (Lyons and Mehta 1997;Das and Teng 1998). So, the 'fundamental disagreement in the literature' on the relationship between trust and control (Lane 1998: 25) and the question how trust and contract are related remain.…”

Subcontracting and the Reregulation of the Employment Relationship: A Case Study from the Telecommunications Industry

“…This is reflected on an empirical level by the interest in so called Japanese style 'relational' (Oliver and Wilkinson 1992) or 'obligational' (Morris and Imrie 1993) contract relationships (Oliver and Wilkinson 1992;Morris and Imrie 1993;Turnbull 1991;Trevor and Christie 1988), many of the features of which are mirrored elsewhere, within 'supplier partnerships' or 'partnership sourcing' arrangements (Collins 1997). Running such contracts require the developments of relations that go beyond the formal, and into the development of 'trust' (Deakin and Walsh 1996;Butler and Carney 1983;Deakin and Michie 1997;Collins 1997;Lyons and Mehta 1997;. Trust must, however, be rooted in the institutional framework or contractual environment within which it operates.…”