Contracts as cornerstones in relationship building

Purpose – The purpose of this paper is to investigate the significance of contracts in long‐term relationship building comparing public and private contexts. In order to investigate this, the paper addresses literature about relationship building, negotiation process and the role of contracts. Design/methodology/approach – This paper takes a qualitative approach and is based on comparative studies between the private and public sectors with the main focus on four companies within the public transport and paper industry. The unit of analysis is the enterprise's use of contracts in relationships. The analysis is based on the empirical material received from interviews and contextual analysis of the actual contracts. Internal and external documents have also been used in the analysis. The paper has categorized the material into different areas in relation to the relationship building. Findings – In this paper the authors highlight the importance of contracts in the interaction between companies in different business situations. The findings in this study show that contracts function as cornerstones in relationship building. The conclusions also indicate that the type of contract used is depending of the uncertainty in the business relationship due to the relationship lifecycle. A main contribution from the study is that contracts affect the relationship building. In the private sector the relationship forms the contract while in the public sector the contract forms the relationships. Originality/value – Previous research has mainly focused on how to manage long‐term relationships where the relationship is the result of a gradual development process between the parties and where there are few or next to no regulations regarding the interactions between the parties, for example who are involved or how the counterparty should be selected. Consequently, the results of this study adds to the literature the importance of contracts in long‐term relationship building comparing private and public contexts. Further, previous research has acknowledged that there is a need for more empirical research concerning the nature and form of contractual arrangements.