Qiyuan Zhang

Governing Local Supplier Opportunism in China: Moderating Role of Institutional Forces

Given the prominent role of China as a manufacturing supply base, how to curtail local supplier opportunism becomes a central concern for both domestic and foreign buyers. Drawing on the institutional view, this study examines how policy uncertainty and ownership structures moderate the roles of explicit contracts and trust in restricting local supplier opportunism in China. Based on the analysis of 293 buyer-supplier dyadic relationships in China, this study finds that explicit contracts are effective in safeguarding against opportunism when policy uncertainty is high, whereas trust reduces opportunism when policy uncertainty is low. Further, for foreign buyers, the use of trust is more salient in deterring local supplier opportunism than local buyers; yet explicit contracts are more effective for domestic interfirm transactions to constrain local partner opportunism than international exchanges.