Suppressing or motivating opportunism? The effectiveness of contract enforcement in manufacturer-distributor relationship

Abstract

The importance of opportunism as a primary threat to marketing channel relationship has received substantial attention from literature. This study explores an important while under-researched impact of contract enforcement on opportunism in manufacturer-distributor relationship, with a functional approach to contract enforcement adopted. A framework integrating different levels of analysis is developed to comprehensively examine how the impacts posed by mechanisms, contractual control enforcement and contractual coordination enforcement, differ as the levels of institutional development and information technology (IT) capability vary. This study analyzes data from manufacturers and one secondary dataset, empirically confirming the direct and negative impacts of contractual control/coordination enforcement on opportunism. Furthermore, the institutional development reinforces the deterrent effect of contractual control enforcement on opportunism, while having no impact on the effect on the contractual coordination enforcement in suppressing opportunism. Besides, the efficacy of contractual coordination enforcement in constraining opportunism can be strengthened by IT capability, which, however, weakens the opportunism-curbing effect of contractual control enforcement. Overall, this study addresses the relationship between contractual governance and organizational and environmental contingencies, developing useful implications for interfirm relationship management.