Contract Enforcement in Marketing Channels: Contract Legitimacy and Influence Strategies

Abstract

Prior research has yet to explore the endogenous nature of the contract itself that may affect contract enforcement. Drawing insights from the institutional theory, we investigate the how three types of contract legitimacy (i.e., regulative legitimacy, normative legitimacy, and cognitive legitimacy) influence the effectiveness of interfirm contract enforcement, and the moderating effects of influence strategies. We examine the effectiveness of contract enforcement not only taking account of the behavioral results of compliance, but also internal perception of channel dyadic trust. Using a longitudinal field survey data and archival data, we find three types of legitimacy play different roles in influencing compliance and trust. Cultural- cognitive legitimacy is the most effective one for the trust building, and non-coercive influence strategies can improve the effectiveness of three-type legitimacy better than coercive influence strategies. This paper contributes to the institutional literatures by investigating the effectiveness of legitimacy building of marketing channel contracts, and further explores the interaction effect of legitimacy building strategies and the exercise of influence strategies.