Different roles of control mechanisms in buyer-supplier conflict: An empirical study from China

Abstract

Using transaction cost economics and contemporary insights from the literature on relationship contracts as a base, this paper focuses on how control mechanisms (contracts and trust) affect relationship conflicts in buyer-supplier relationships, and investigates the moderating effects of environmental uncertainty. Based on a sample of 162 Chinese buyers, this paper shows that contracts have a U-shaped effect on destructive conflict and an inverted U-shaped effect on constructive conflict, while trust has a negative effect on destructive conflict and a positive effect on constructive conflict. In addition, environmental uncertainty strengthens the U-shaped effect of contracts on destructive conflict, but weakens the inverted U-shaped effect of contracts on destructive conflict and strengthens the effect of trust on both types of relationship conflict. Our findings reveal the “double-edged sword” nature of contracts, especially the “dark side”, and highlight the importance of trust in buyer-supplier relationships in contexts of environmental uncertainty. These findings also have important implications for buyer-supplier relationship management research and managerial practices, particularly in regard to governance structure and conflict management in dynamic contexts.