Relational contract norms and the effectiveness of commercial banking relationships

Abstract

Bases the present study, on Macneil’s relational contract theory and illustrates the conceptual and managerial importance of relational norms in a business‐to‐business service context. Demonstrates a clear link between the client’s perception of the strength of the bank‐client relationship, as measured by relational norms, and the client’s intention to continue to purchase financial services and to purchase new financial services, willingness to recommend both the account manager and the bank to business colleagues and, assessment of satisfaction and judgement of service quality. Finds significant differences between the assessment of the strength of the relationship by account managers and client‐company representatives; these differences would have important managerial implications in the context of commercial banking.

Firm–employee relationship strength—A conceptual model

“…Contrary to both the Donaldson and O'Toole (2000) measure and that of Paulin and colleagues (Paulin et al, 1997(Paulin et al, , 2000, Shemwell and Cronin (1995) and Bove and Johnson (2006) treat trust and commitment as multi-item measures. However, as with all the marketing representations, there is no inclusion of the emotional elements of attachment, highlighting this difference between the social psychology and marketing view of relationship strength.…”

“…From the relationship marketing perspective, Donaldson and O'Toole (2000) and Paulin, Perrien, and Ferguson (1997) (with refinements by Paulin et al, 2000) develop measures of relationship strength. Donaldson and O'Toole (2000) develop and utilize a direct measure of relationship strength which they use within the industrial supplier-buyer relationship to discriminate between different types of relationship structures.…”

“…The measure operationalizes relational norms, drawing on the belief that most of the variables of interest to the measurement of relationship strength are different relational norms. These relational norms include trust, commitment, information sharing, benefits, joint working and relationship specific assets (Paulin et al, 1997(Paulin et al, , 2000. They estimate relationship strength by assessing role integrity, communication, flexibility and solidarity.…”

“…Finally, social and emotional elements, such as attachment and affection, which emerge from the non-marketing literature as likely key components of firm-employee relationship strength are absent from Donaldson and O'Toole's (2000) measure. Paulin et al (1997Paulin et al ( , 2000 use Macneil's (1980) social contract theory to conceptualize and develop a measure of relationship strength for use in relationship marketing research. They focus on service relationships between clients and account managers, utilizing the banking sector as the context for their research.…”

Determinants of Service Contract Outcomes

“…After all, even the most thorough contracts cannot possibly cover all contingencies. Numerous positive effects of relational exchange include increased cooperation (Morgan & Hunt, 1994), reduced opportunism (Brown, Dev, & Lee, 2000;Joshi & Stump, 1999), increased performance (Skarmeas, Katsikeas, & Schlegelmilch, 2002), and increased satisfaction and service quality (Paulin, Perrien, & Ferguson, 1997). Therefore,…”