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Paper info: Opportunism and monitoring in intrafirm and interfirm partnerships: a behavioural perspective

Title


Opportunism and monitoring in intrafirm and interfirm partnerships: a behavioural perspective

Authors


Ghasem Zaefarian, Zhaleh Najafi Tavani and Matthew Robson

Place of Publication


The paper was published at the 35th IMP-conference in Paris, France in 2019.

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Abstract


Productive intrafirm and interfirm partnerships are fundamental for firms. Yet, the risk of a partner’s opportunism - a key behavioural assumption of transaction cost theory (TCT) - remains a major threat to the effective management of such relationships. In an intrafirm or interfirm partnership, the occurrence of opportunism by one party has detrimental consequences and spill-over costs for the other, as well as for the relationship itself. Given the corrosive consequences of opportunism in partnerships, it is important to fully understand the factors that promote or constrain such behaviour. TCT literature considers monitoring to be a key governance mechanism which, despite imposing its own transaction costs, is commonly practiced by firms to curb opportunism and mitigate associated risks. However, a more psychological view of the transaction should take into account the interaction between an exchange partner’s management team and the exchange environment it finds itself appraising. The transactional theory of stress (Lazaruset al., 1984) maintains that stress resulting from job demands imposed by the exchange partner can incur unintended negative behavioural consequences, such as opportunism. We posit that transactional stress theory can inform how to distinguish opportunists from non-opportunists. To this end, we conducted studies in two different exchange contexts: MNC headquarters -subsidiary and cross-border buyer-supplier partnerships. Based on separate samples of 209 Chinese subsidiaries’ and 232 Chinese suppliers’ intrafirm and interfirm partnerships, respectively, the results suggest challenge and hindrance stressors impact opportunism differently, with the former exhibiting a U-shaped, and the latter a positive, relationship with opportunism. Monitoring steepens the U-shaped challenge stressor-opportunism relationship in intrafirm partnerships, but weakens the positive hindrance stressor-opportunism relationship in interfirm partnerships.