CONTRACT V. TRUST: AN EXAMINATION OF TRUST FORMATION IN CONTRACTING DYADS.

Author

Dexter Rowe Gruber, Southern Illinois University CarbondaleFollow

Date of Award

12-1-2017

Degree Name

Doctor of Philosophy

Department

Business Administration

First Advisor

Goodale, John

Abstract

Contracts and trust are two of the most important concepts impacting exchange relationships. Although there is a substantial amount of organizational literature scrutinizing contracts and trust as mechanisms of cooperation, very little of this scholarship has been empirical and, thus, our understanding is very limited. The two constructs have been cast as substitutes by some scholars and complements by others, but this body of research has largely ignored the potential for an interactive effect. One such effect has been postulated by select organizational scholars, entitled the “contract contrarian perspective” by this research, who tout that the introduction of written contracts has a negative effect on trust between the parties. The apex objective of this study was to examine how contracts affect the existence and development of trust between bargaining partners. This inquiry tested the contract contrarian perspective to determine if the introduction of a written contract into a negotiation damages trust or retards trust-building. In addition, this research offered an alternative explanation for the contract contrarian perspective and posited that any negative effect on trust that may occur during the contracting process might not be the result the introduction of a written contract but, rather, of the disparity in the parties’ relative bargaining power or the asymmetry of their legal sophistication. As trust is a complex construct, the present disquisition separated trust into two dependent variables: goodwill trust and competence trust. This allowed us to examine how the introduction of a contract affects different aspects of trust, thus, allowing for more precise indication of the effects. Consistent with the contract contrarian perspective, it was hypothesized that the introduction of a written contract into a negotiation would produce a negative effect on trust levels. It was also hypothesized that both bargaining power and legal sophistication would moderate the potential negative effect of introducing a contract into a negotiation. The study employed a vignette experimental design methodology and utilized a sample of 220 participants from a contracted data collection service and the data were analyzed with ANOVA and MANOVA. The results did not support the contract contrarian perspective’s claim and did not support the hypotheses regarding moderation; however, this study did find that both bargaining power and of legal sophistication had significant impacts on goodwill trust and competence trust.