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Institutions and opportunism in buyer–supplier exchanges: the moderated mediating effects of contractual and relational governance

Abstract

The marketing channel literature has paid limited attention to institutional environments that constrain buyer–supplier exchanges, though such institutions are fundamental determinants of transaction costs, and thus of the occurrence of opportunism in the buyer–supplier dyads. Drawing on transaction cost economics and institutional theory, this study uncovers the critical influence of formal and informal institutions (i.e., legal effectiveness and networking expenditure) on the use of governance in deterring opportunism, as well as the moderating role of government support on the efficacy of governance mechanism. The findings from a buyer–supplier dyadic survey and 2 secondary datasets reveal that legal effectiveness mitigates opportunism through increased use of both contractual and relational governance; in contrast, networking expenditure reduces opportunism through relational governance, yet increases opportunism via lowering contractual governance. In addition, contractual governance is more efficient in constraining opportunism when government support is high, whereas relational governance deters opportunism more when government support is low. These findings offer important implications for academic research and managerial practice.

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Notes

  1. 1.

    The World Bank’s Doing Business Survey ( 2008) investigates the effectiveness of legal enforcement in the capital cities of 26 provinces and 4 centrally administered municipalities in China. The average number of procedural steps required to investigate a commercial dispute is the same (31 steps) for all 30 cities, because these steps follow a national, standardized, written code. However, the efficiency of the courts varies significantly across cities: The average number of days to solve a commercial dispute ranges from 112 (Nanjing) to 540 days (Changchun), with a mean of 319.07 and a standard deviation of 89.33. Average court and attorney fees, expressed as a percentage of the claim value, swing from 9.00% (Shanghai) to 41.80% (Hefei), with a mean of 21.78% and a standard deviation of 9.04%.

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Acknowledgement

The authors thank the Editor, Dr. Robert W. Palmatier and 3 anonymous reviewers for their insightful comments and guidance. This study was supported by a grant from the Research Grants Council of the Hong Kong Special Administrative Region, China (Project No. CityU 11507615).

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Correspondence to Zhaoyang Guo.

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Satish Jayachandran served as Area Editor for this article.

Appendix 1

Appendix 1

Table 6 Survey measures

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Sheng, S., Zhou, K.Z., Li, J.J. et al. Institutions and opportunism in buyer–supplier exchanges: the moderated mediating effects of contractual and relational governance. J. of the Acad. Mark. Sci. 46, 1014–1031 (2018). https://doi.org/10.1007/s11747-018-0582-9

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Keywords

  • Institutional theory
  • Legal effectiveness
  • Networking expenditure
  • Government support
  • Opportunism
  • Buyer–supplier exchanges
  • Contractual governance
  • Relational governance
  • China