Response strategies to contract violation in channel relationship : antecedents and consequences

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Response strategies to contract violation in channel relationship : antecedents and consequences

 

Author: Fok, Yuk-fung Josephine
Title: Response strategies to contract violation in channel relationship : antecedents and consequences
Degree: D.B.A.
Year: 2010
Subject: Hong Kong Polytechnic University -- Dissertations
Contracts -- Economic aspects.
Industrial procurement
Relationship marketing
Attribution (Social psychology)
Department: Graduate School of Business
Pages: xi, 187 leaves : ill. ; 30 cm.
InnoPac Record: http://library.polyu.edu.hk/record=b2394261
URI: http://theses.lib.polyu.edu.hk/handle/200/6007
Abstract: In the buyer-supplier relationship, explicit contract can reduce each party's uncertainty by providing formal rules that govern the relationship. Clear guidelines stipulated on contracts specify the rights and obligations of both parties. These improve coordination and thus increase both parties' commitment. Contracts likewise serve as deterrence against exploitation and opportunistic behavior as they explicitly state the legal and economic consequences associated with contract violation. Given the prevalence of contract violations and their significant impact on the exchange relationship and the economic outcomes generated, the topic of understanding contract violation and response strategies to manage such violation is deemed important and timely. This study aims to advance the understanding of how channel members may better manage the contract violation through effective deployment of response strategies. It was accomplished in four ways: (1) developing a new three-dimensional taxonomy of response strategies to contract violation by integrating inter-firm governance and response literature-Tolerance, increase of monitoring, and increase of information sharing; (2) examining how principal attribution in terms of stability and controllability affects the choice of response strategies by drawing on the literature of attribution theory; (3) testing whether the relationship between attribution of contract violation and response strategies changes across interpersonal ties cultivated by firm mangers; and (4) examining how each response to contract violation relates to buyer-supplier relationship. Measures of two attributions, three dimensions of response strategies and relational consequence were obtained from 165 merchandising managers in a multinational trading company. To validate the impact of response strategies from a dyadic perspective, corresponding evaluation of the relational consequence were obtained from 162 focal suppliers. Findings of this study suggest that buyers' reactions are influenced by casual attribution of the perceived contract violation. Causal attribution of stability is observed to be negatively associated with response with tolerance, and positively associated with responses with increased use of monitoring, but not with increase of information sharing, while causal attribution of controllability is observed to be negatively associated with respond with tolerance, and positively associated with both responses with increase of monitoring and information sharing. The results likewise indicate that interaction of managerial ties with causal stability and controllability had significant effects on the response with tolerance and increased use of information sharing respectively, such that the negative effect of stability on the response with tolerance will be weaker, and the positive effect of controllability on the response with increased use of information sharing will be stronger respectively when the managerial ties are higher. With regards to the relationship between response strategies and relational consequence, the results reveal that these more proximal buyers' responses affect overall perceptions of relational quality between buyers and sellers after contract violation. Response with tolerance and increase of information sharing were observed to have a partially positive effect on relational consequence while increase of monitoring has negative effect on relational consequence. With respect to these findings, theoretical and managerial implications were discussed, along with limitation of the study and directions for future research.

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