Untangling the safeguarding and coordinating functions of contracts: Direct and contingent value in China

Abstract

By untangling two distinct facets of contracting, this study investigates how task specificity and contingency specificity differentially affect relationship performance in an emerging economy. The paper posits that task specificity serves as safeguards in regulating interfirm transactions, and contingency specificity plays a coordinating role by offering response blueprints for uncertain events. The results from a survey of 334 manufacturer-supplier dyads in China suggest that task specificity fosters supplier performance. However, as exchange uncertainty increases, the role of task specificity declines, but the role of contingency specificity increases. Contingency specificity also exerts a stronger impact when exchange tacitness is high.