This study aims to explore contract ambiguity as a contract adjustment tactic to respond to two characteristics of interfirm conflict (intensity vs frequency) and examine how contract ambiguity influences relationship satisfaction in conjunction with institutional factors.
The authors test their model with data from 207 interfirm relationships. Structural equation modeling and hierarchical moderated regressions are used to test the hypotheses, followed by four supplementary analyses to verify the reliability of the findings.
In contract adjustment tactics, higher conflict intensity is associated with greater contract ambiguity, whereas higher conflict frequency results in less ambiguity. High conflict frequency offsets the ambiguity-generating effects of high conflict intensity, ultimately driving firms to reduce contract ambiguity. In addition, relationship importance moderates the above correlations. Moreover, in the post-adjustment stage, formal governance through legal development and informal governance through social engagement moderate the impact of contract ambiguity on relationship satisfaction.
The authors advance contract learning theory by uncovering the role of contract ambiguity as a contract adjustment tactic and enrich the conflict management literature by examining the effectiveness of contract ambiguity to manage two characteristics of conflict (intensity vs frequency). The authors also demonstrate how legal development and social engagement vary the effect of contract ambiguity on relationship satisfaction.
The authors suggest that firms should consider the characteristics of interfirm conflict when selecting a contract adjustment tactic. The authors recommend that the focal dyad adjust the contract contingent on the requirement of external legal development. The authors also recommend that the focal firm increase social activities with its partner following contract adjustment to leverage the advantages of contract ambiguity.
This study conceptualizes and distinguishes two characteristics of interfirm conflicts and examines the effectiveness of contract ambiguity to manage conflicts. By correlating them with relationship importance, legal development and social engagement as contingent variables, the authors provide substantive theoretical and practical implications for optimizing relationship satisfaction and contract adjustment tactics in interfirm relationships.
