Thinking alike or not: Performance implications of transactional psychological contract congruence in buyer–supplier new product development projects

Abstract

AbstractA buyer–supplier new product development (NPD) project is an ambiguous and complex transaction, making neither formal contracts nor a collaborative relationship sufficient to ensure project success. NPD project performance could also be directly influenced by the transactional psychological contracts (TPCs) of project members due to their strong motivational effect. Adopting a dyadic view, we explore the performance implications of buyer–supplier TPCs (in)congruence using a matched, dyadic survey dataset from 279 NPD projects. We find that levels of congruence (congruent vs. incongruent), types of congruence (high–high vs. low–low), and directions of incongruence (buyer‐higher vs. supplier‐higher) all affect project performance. Challenging the conventional wisdom that buyer–supplier congruence is generally productive, we find that congruence in TPCs, a generally undesirable type of PC, lowers product quality in NPD projects. This is because congruence in TPCs locks project members in the status quo by creating psychological balance and removing healthy conflicts, which prevents a team from balancing between exploration and exploitation. The combination of buyer‐lower, supplier‐higher TPCs incongruence is most effective for improving both product quality and development efficiency. These results remind NPD project managers that buyer and supplier TPCs can interact to jointly affect project outcomes beyond individual influences of each party's TPC.