The interaction effect of trust and contract on dispute negotiation strategy: evidence from the Chinese construction industry

Abstract

PurposeThis paper aims to investigate how and when different dimensions of trust and contracts interact to influence the development to negotiation strategies. Specifically, it explores how different dimensions of trust and contracts are combined to influence dispute negotiation strategies when cooperation parties have or do not have expectations of continuity.Design/methodology/approachThis paper theoretically identified and empirically examined the interaction effect of trust and contract on dispute negotiation strategies in contractor–subcontractor relationships, by developing a conceptual framework and conducting a questionnaire survey comprising more than 300 disputes in the Chinese construction industry. Hierarchical regression analysis was mainly used to test the hypotheses.FindingsThis paper finds that contractual control may weaken the effect of goodwill trust in fostering interest-based strategies in the presence of expectations of continuity, while it may strengthen the effect in the absence of expectations of continuity. Contractual coordination negatively moderates the relationship between goodwill trust and interest-based strategies only when parties have little expectations of continuity. Moreover, contractual control enhances the effectiveness of competence trust on fostering interest-based strategies.Practical implicationsThis paper provides insights for practitioners to wisely use different governance mechanisms to manage negotiation strategies and generate desired outcomes of dispute resolution.Originality/valueThis paper provides a nuanced understanding of how the two types of governance mechanisms interact, by considering trust and contract as multi-dimensional constructs. It explicit the boundary conditions of both the substitute and complementary relationship between them.