Drivers and Outcomes of Long-term Orientation in Cooperative Relationships

Authors


  • The work described in this paper was partially supported by the Australian School of Business Research Grant (PS17226) and the Competitive Earmarked Research Grant provided by the Research Grants Council of the Hong Kong SAR, China (CityU1433/05H). We thank Matthew Robson, the Associate Editor, and two anonymous reviewers for their helpful comments and Jody Wong for her able research assistance. We also are grateful to Sunghoon Kim and Simon Restubog for their helpful comments.

Abstract

We argue in this paper that a buyer may deliberately develop long-term orientation as a governance mechanism to deal with risks arising from exchange hazards, and to reduce the opportunistic behaviour of a supplier. While the exchange hazards of asset specificity pose a safeguarding problem, those of market uncertainty pose an adaptation problem. We test our model on a sample of 221 procurement partnerships. Our results show that satisfactory prior history of a supplier, asset specificity of the buyer and market uncertainty are all positively related to a buyer's long-term orientation towards a supplier. Consistent with the idea that asset specificity and market uncertainty pose different governance problems, we find that satisfactory prior history reduces the positive relationship between asset specificity and a buyer's long-term orientation, but enhances the positive relationship between market uncertainty and a buyer's long-term orientation. We also find that a buyer's long-term orientation fully mediates the relationship between satisfactory prior history and a supplier's opportunistic behaviour. Finally, implications on the theory and the practices of relationship governance are discussed.

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