Do Favour and Face matter in Collaboration? :Explicit and Implicit Contracting

Dr. Wong Y. H.

Department of Management and Marketing,

Hong Kong Polytechnic University

Research Objective

1. What are the key antecedents behind de facto collaborations?

2. Why do coactive dependence, explicit-implicit controls and face-favourexchanges with an insider partner affect the development of insider’s loyalty and the quality of the de facto relationship?

Insider’s Loyalty• The underlying reason for the success of de facto

collaborations is due to its ability to generateinsider’s loyalty

• Insider’s loyalty refers to the strength of therelationship between the two collaboratingorganisations

• We conceptualize a model of generating insider’sloyalty through a de facto relationship in theform of a “Three Cs” framework

P6

“Three C” Model of Insider’s Loyalty

ContractingManagementCoactive

Dependence

Marketing Mix Human

Resources Logistic Capital

Investment

Customization Exploration

Insider’s Loyalty

Explicit Contract

Implicit Control

Face Exchange

Favor Exchange

P4

P2P1

P3

P5

Three “Cs” represent the key elements behind insider’s loyalty

Proposition

• P1: Coactive dependence is correlated with explicit & implicit controls.

• P2: Favour & face exchange is correlated with the level of insider’s loyalty.

• P3: The level of coactive dependence is correlated with the use of face & favour exchange.

• P4: Implicit control & explicit contracting is interrelated.

• P5: Explicit & implicit controls improve insider’s loyalty.

• P6: Explicit & implicit controls are correlated with use of face & favour exchange.

Contracting Management

• Explicit Contract

• Classical contract in written or verbal form

• Governs the economic relationship between organizations

• Less effective in generating loyalty

• Implicit Control

• Adjust the partners’ behavior and explicit contract

• Provide a softer and more flexible framework

• leads to insider’s loyalty between the organizations

Customization exploration

Favour exchange• “Unilateral acts of giving that either reciprocates

previously rendered or are given with expectations of direct reciprocation” (Blau, 1964).

• Such as gift-giving

• Show respect and consideration and recognize the status of the other partner

• A process that magnifies commitment and minimizes defensiveness

• Strong commitment can result in loyalty (Jones, Taylor & Bansal, 2008)

Customization Exploration

Face exchange

• “Face” is perceived as one’s own credibility

• Exchange of partner's respect, status, and moral reputation as the recognized by other partner inside a network of supply chain

• Perceived as individual symbolic capital, owing to the presence of a certain form of power.

Results

1. The usage of favour exchange is expected to result in a long-term relationship characterized by loyalty.

2. Explicit contracts and implicit controls that exist between the parties.

The stronger the explicit contract and levels of collective belief are, the higher the level of loyalty is.

Results

3. Insider’s loyalty is affected by

• Exchange partners’ perception of, or experience regarding, previous relationship in terms of relationship customization, harmony, an financial benefits

A higher level of relationship quality brings stronger loyalty.

Discussion

• Our results show that an explicit contract ties suppliers and customers via an agreement

• While implicit control tends to tie both parties with mutual understanding.

• The explicit contract appears to govern the economic association while implicit control provides the norms.

• The results indicate that although implicit control leads to loyalty, an explicit contract does not directly do so.

Discussion

• An explicit contract appears to have nosignificant association with face exchange,meaning that the relationship can be wellmaintained if both parties follow thecontractual agreement.

• However, when the environment is unstable,the relationship requires flexibility in the formof implicit control and favour exchange.

Implication• Successful collaboration is pivotal in all industries.

• A specific example: Shipping terminal industry

• Keen global competition demands seamless collaboration in supply chain processes including shippers in the upstream and consignees in the downstream.• Goal: To meet the needs of various partners with higher

effectiveness and efficiency than other competitors.

• To measure the overall performance of a supply chain, firms need to incorporate the service effectiveness of customization exploration in terms of:

• Supply chain’s reliability and flexibility

• Measured by the extent of coactive dependence and favour exchanges in our.

Conclusion

• To provide academics and practitioners with a new dynamic tool integrated framework in understanding and implementing effective insider’s loyalty strategies.

• Yield new insights into de facto collaborative programs with regard to loyalty-building process.