Improving performance and curtailing opportunism: the role of contractual issue inclusiveness and obligatoriness in channel relationships

Purpose The purpose of this study is to enhance the understanding of the role of contracts in channel relationships. Treating contracts as a multidimensional construct, this study examines the effects of contractual issue inclusiveness and contractual obligatoriness on performance and opportunism, as well as the moderating effects of relational norms on the above relationships. Design/methodology/approach Based on the data of 206 samples collected from distributors of house furnishing, computer and computer components, moderated regression is used to test the hypotheses. Findings The empirical test generally supports the conceptual model and provides three findings. First, contractual issue inclusiveness is more profound in enhancing relationship performance than contractual obligatoriness, and contractual obligatoriness is more statistically powerful in mitigating opportunism than contractual issue inclusiveness. Second, relational norms can enhance the positive effect of contractual issue inclusiveness but not contractual obligatoriness on performance. Third, relational norms can strengthen the negative effect of contractual obligatoriness but not contractual issue inclusiveness on opportunism. Research limitations/implications First, this study investigates only contractual issue inclusiveness and contractual obligatoriness, and future studies should consider other dimensions of contracts. Second, the influence of external environment is not considered in the model. Third, data from Chinese distributors limit the generalization of conclusions. Finally, data come only from buyers, and suppliers’ viewpoints are not included. Practical implications The results provide a framework for managers to use contracts and relational norms. Managers should pay attention to the alignment between contractual dimensions and firm objectives because various dimensions of contracts have different impacts on channel relationships. Originality/value Prior research has documented contracts’ role in coordinating channel relationships but has not achieved consistent conclusions on contracts’ effectiveness. Furthermore, extant research indicates that channel members will use contracts and relational norms simultaneously but has conflicting views on the combined effects of these two control mechanisms. The study contributes by addressing these issues.