Contract completeness and relationship outcomes: The mediating role of contract utilization”

Abstract

This study incorporates logic from transaction cost economics and information overload research to investigate (1) the nonlinear effects of contract completeness on contract utilization and (2) the mediating role of contract utilization on the relationships between contract completeness and two key outcomes—performance and opportunism. The findings suggest that contract completeness increases utilization at a decreasing rate. Contract utilization mediates the influence of contract completeness on opportunism and performance. This research extends transaction cost logic by acknowledging one's cognitive limitations during ex post contract utilization, rather than solely focusing on cognitive limitations during ex ante contract drafting. Theoretical and managerial implications for contract drafting and utilization are discussed.