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Managing contracts for fairness in buyer–supplier exchanges
Author(s) -
Poppo Laura,
Zhou Kevin Zheng
Publication year - 2014
Publication title -
strategic management journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 11.035
H-Index - 286
eISSN - 1097-0266
pISSN - 0143-2095
DOI - 10.1002/smj.2175
Subject(s) - business , corporate governance , safeguarding , opportunism , centrality , social exchange theory , microeconomics , function (biology) , complement (music) , industrial organization , economics , finance , social psychology , psychology , nursing , medicine , market economy , chemistry , mathematics , combinatorics , evolutionary biology , biology , biochemistry , complementation , gene , phenotype
Despite the centrality of fairness in the moral and social fabric of governance, few studies relate fairness to contracting research. This paper assesses whether fairness accounts for the effects of contractual complexity and contractual recurrence on exchange performance. Based on a sample of 283 buyer–supplier dyads, we find that procedural fairness partially mediates the effect of contractual complexity, whereas distributive fairness partially mediates the effect of contractual recurrence in fostering exchange performance. Moreover, monitoring better supports the use of contractual complexity, whereas socializing better supports the use of contractual recurrence in enhancing fairness perceptions. These results suggest that contractual design must go beyond its safeguarding function to establish a fair frame of reference, and managers should complement contracts with appropriate practices (e.g., monitoring or socializing) . Copyright © 2013 John Wiley & Sons, Ltd.