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Article: Exchange hazards, relational reliability, and contracts in China: The contingent role of legal enforceability

TitleExchange hazards, relational reliability, and contracts in China: The contingent role of legal enforceability
Authors
KeywordsChina
Contracts
Institutional change
Legal enforceability
Transaction cost economics
Trust
Issue Date2010
PublisherPalgrave Macmillan Ltd. The Journal's web site is located at http://www.palgrave-journals.com/jibs/index.html
Citation
Journal Of International Business Studies, 2010, v. 41 n. 5, p. 861-881 How to Cite?
AbstractBuilding on institutional and transaction cost economics, this article proposes that legal enforceability increases the use of contract over relational reliability (e.g., beliefs that the other party acts in a non-opportunistic manner) to safeguard market exchanges characterized by non-trivial hazards. The results of 399 buyer-supplier exchanges in China show that: (1) when managers perceive that the legal system can protect their firm's interests, they tend to use explicit contracts rather than relational reliability to safeguard transactions involving risks (i.e., asset specificity, environmental uncertainty, and behavioral uncertainty); and (2) when managers do not perceive the legal system as credible, they are less likely to use contracts, and instead rely on relational reliability to safeguard transactions associated with specialized assets and environmental uncertainty, but not those involving behavioral uncertainty. We further find that legal enforceability does not moderate the effect of relational reliability on contracts, but does weaken the effect of contracts on relational reliability. These results endorse the importance of prior experience (e.g., relational reliability) in supporting the use of explicit contracts, and alternatively suggest that, under conditions of greater legal enforceability, the contract signals less regarding one's intention to be trustworthy but more about the efficacy of sanctions. © 2010 Academy of International Business All rights reserved.
Persistent Identifierhttp://hdl.handle.net/10722/137605
ISSN
2015 Impact Factor: 3.62
2015 SCImago Journal Rankings: 4.208
ISI Accession Number ID
References

 

DC FieldValueLanguage
dc.contributor.authorZhou, KZen_HK
dc.contributor.authorPoppo, Len_HK
dc.date.accessioned2011-08-26T14:28:43Z-
dc.date.available2011-08-26T14:28:43Z-
dc.date.issued2010en_HK
dc.identifier.citationJournal Of International Business Studies, 2010, v. 41 n. 5, p. 861-881en_HK
dc.identifier.issn0047-2506en_HK
dc.identifier.urihttp://hdl.handle.net/10722/137605-
dc.description.abstractBuilding on institutional and transaction cost economics, this article proposes that legal enforceability increases the use of contract over relational reliability (e.g., beliefs that the other party acts in a non-opportunistic manner) to safeguard market exchanges characterized by non-trivial hazards. The results of 399 buyer-supplier exchanges in China show that: (1) when managers perceive that the legal system can protect their firm's interests, they tend to use explicit contracts rather than relational reliability to safeguard transactions involving risks (i.e., asset specificity, environmental uncertainty, and behavioral uncertainty); and (2) when managers do not perceive the legal system as credible, they are less likely to use contracts, and instead rely on relational reliability to safeguard transactions associated with specialized assets and environmental uncertainty, but not those involving behavioral uncertainty. We further find that legal enforceability does not moderate the effect of relational reliability on contracts, but does weaken the effect of contracts on relational reliability. These results endorse the importance of prior experience (e.g., relational reliability) in supporting the use of explicit contracts, and alternatively suggest that, under conditions of greater legal enforceability, the contract signals less regarding one's intention to be trustworthy but more about the efficacy of sanctions. © 2010 Academy of International Business All rights reserved.en_HK
dc.languageengen_US
dc.publisherPalgrave Macmillan Ltd. The Journal's web site is located at http://www.palgrave-journals.com/jibs/index.htmlen_HK
dc.relation.ispartofJournal of International Business Studiesen_HK
dc.rightsJournal of International Business Studies. Copyright © Palgrave Macmillan Ltd.-
dc.rightsThis is a post-peer-review, pre-copyedit version of an article published in Journal of International Business Studies. The definitive publisher-authenticated version Journal of International Business Studies, 2010, v. 41 n. 5, p. 861-881 is available online at: http://www.palgrave-journals.com/jibs/journal/v41/n5/full/jibs20107a.html-
dc.rightsCreative Commons: Attribution 3.0 Hong Kong License-
dc.subjectChinaen_HK
dc.subjectContractsen_HK
dc.subjectInstitutional changeen_HK
dc.subjectLegal enforceabilityen_HK
dc.subjectTransaction cost economicsen_HK
dc.subjectTrusten_HK
dc.titleExchange hazards, relational reliability, and contracts in China: The contingent role of legal enforceabilityen_HK
dc.typeArticleen_HK
dc.identifier.openurlhttp://library.hku.hk:4550/resserv?sid=HKU:IR&issn=0047-2506&volume=41&issue=5&spage=861&epage=881&date=2010&atitle=Exchange+hazards,+relational+reliability,+and+contracts+in+China:+The+contingent+role+of+legal+enforceability-
dc.identifier.emailZhou, KZ: kevinz@hkucc.hku.hken_HK
dc.identifier.authorityZhou, KZ=rp01127en_HK
dc.description.naturepostprint-
dc.identifier.doi10.1057/jibs.2010.7en_HK
dc.identifier.scopuseid_2-s2.0-77953154533en_HK
dc.identifier.hkuros191978en_US
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-77953154533&selection=ref&src=s&origin=recordpageen_HK
dc.identifier.volume41en_HK
dc.identifier.issue5en_HK
dc.identifier.spage861en_HK
dc.identifier.epage881en_HK
dc.identifier.eissn1478-6990-
dc.identifier.isiWOS:000278354300008-
dc.publisher.placeUnited Kingdomen_HK
dc.identifier.scopusauthoridZhou, KZ=7202914654en_HK
dc.identifier.scopusauthoridPoppo, L=6508060826en_HK
dc.identifier.citeulike7285222-

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