Bart S. Vanneste

Repeated Interactions and Contractual Detail: Identifying the Learning Effect

Organizations interacting repeatedly on similar transactions may learn from prior experiences, allowing contracts to be specified in greater detail. In this study, we analyze the conditions under which this learning effect is most likely to manifest itself. We do this by focusing on different parts of a contract as well as differences across transacting parties. Using a survey of information technology procurement contracts from 788 Dutch small- and medium-sized enterprises, we show that the learning effect is stronger for technical than for legal detail in contracts and is stronger for firms with information technology expertise than for firms without such expertise.

Trust Over Time in Exchange Relationships: Meta-Analysis and Theory

A common premise in prior research is that trust increases over time in relationships. Through a meta-analysis of 39 studies, we find that the bivariate correlation between trust and relationship duration (i) is on average, positive and small and (ii) varies significantly across studies indicating the presences of unobserved moderators. We therefore build a theoretical framework to specify four different mechanisms – initial bias correction, change in relationship value, identification, and trust-based selection – that may affect the development of trust. We then argue that the relative strength of these mechanisms should influence whether trust increases, remains constant, or decreases over time.

Forgiveness in Vertical Relationships: Incentive and Termination Effects

Two types of contractual solutions have been proposed for resolving incentive conflicts in vertical relationships: formal and relational i.e., enforceable or not by third parties. Much is known about the optimal structure of formal contracts, but relatively little is known about the structure of relational contracts. We study a core feature of the latter: the conditions leading to continuation of the relationship, whose prospect gives relational contracts their force. We build a formal model of a vertical relationship between two parties that endogenizes the choice of the minimum performance necessary for continuation as a function of the values of contractibles, noncontractibles, and outside options. The model highlights a basic trade-off between providing strong incentives for the present incentive effect and safeguarding relationships for the future termination effect. The stable relationships that follow from a more forgiving contract are more important under certain conditions when a lot of value is jointly created by exchange partners, i.e., high contractible value, high noncontractible value, or unattractive outside options; however, strong incentives from a less forgiving contract are more important under other conditions when a formal contract is insufficient and a relational contract is most important, i.e., high noncontractible relative to contractible value. We discuss implications for the choice of governance of interorganizational relationships.

Collaboration in Strategic Alliances: Cooperation and Coordination

Strategic alliances are set up to foster collaboration that cannot be achieved through market transactions. In fact, collaboration is often considered the defining feature of alliances — that is, “voluntary arrangements between firms involving exchange, sharing, or codevelopment of products, technologies, or services” (Gulati, 1998: 293). However, many alliances yield disappointing results due to a breakdown in collaboration (Kale and Singh, 2009). Such breakdown may occur due to failures in cooperation or in coordination (Gulati, Lawrence, and Puranam, 2005; Gulati and Singh, 1998). Cooperation is the alignment of incentives, or the extent to which partners are willing to work together. Cooperation is not guaranteed because alliance partners maintain their separate goals. Failures of cooperation can occur for example if synergies are one-sided (i.e., only one partner benefits) or if partners are also each other’s competitor.