Chapter 4: A Contingent View of Interfirm Cooperation: The Role of Firm Similarity in the Linkages Between Trust and Contract

The study of trust and contracting has taken on a very important role in the dialogue between economic and behavioral approaches to organizations. The organizational economic tradition associated with Williamson (1985) has been one of the most influential approaches to analysis of exchange between firms (Adler, 2001). It has also been a very uncomfortable approach for behavioral scientists, who find the underlying economic assumptions excessively reductive (cf. Donaldson, 1990; Ghoshal & Moran, 1996). The research on conditions for contractual and trust-based exchange has become a key empirical setting where these different views are put to the test.

The central question in the work on contracting and trust has been whether contractual organization of exchange and trust-based organization of exchange are interrelated—as substitutes or complements—or if they are unrelated means of facilitating cooperation between firms (Das & Teng, 1998; de Man & Roijakkers, 2009; Faems, Janssens, Madhok, & van Looy, 2008; Inkpen & Currall, 2004; Klein Woolthuis, Hillebrand, & Nooteboom, 2005; Lui, 2009; Lui & Ngo, 2004; Patzelt & Shepherd, 2008; Poppo & Zenger, 2002; Vlaar, van den Bosch, & Volberda, 2007; Zhou & Poppo, 2010). Alliance creates value beyond either market exchange or hierarchy by fostering cooperation (Dyer & Singh, 1998; Thorgren & Wincent, 2011). Cooperative behavior is therefore an important outcome to study. Empirical findings on this question remain equivocal. Some studies have found complementarity, while others suggest that contracting is a substitute for trust (Puranam & Vanneste, 2009).