Showing papers on "Opportunism published in 2014"

Effects of managerial ties and trust on supply chain information sharing and supplier opportunism

Abstract: Managerial ties and trust are important factors in facilitating collaboration and reducing opportunistic behaviour. There is, however, a lack of empirical evidence on how these relational factors influence the sharing of information among supply chain partners. For example, do stronger managerial ties help to improve supply chain information sharing (SCIS) and reduce supplier opportunism? To what extent SCIS is influenced by managerial ties and trust? How do managerial ties interact with trust in influencing SCIS? Using data from 272 Chinese manufacturers, this paper examines the impact of managerial ties and trust on SCIS and supplier opportunism. The results show that, through trust managerial ties can significantly influence the extent of information sharing and the quality of the information shared. Managerial ties also have a direct impact on the extent of information sharing, but not on the quality of the information shared. The main implication for management practice is that the quality of the inf...

Violence, trust, and trustworthiness: evidence from a Nairobi slum

Abstract: We test with a field experiment in a Nairobi slum whether violence suffered during the 2007 political outbreaks affects trustworthiness when interethnicity becomes salient and participants face opportunism in common pool resource games (CPRGs) between two subsequent trust games (TGs). Our findings do not contradict previous one-shot results but qualify and extend them to a multiperiod setting enriching our understanding on the effects of violence on social preferences. More specifically, victimized exhibit higher trustworthiness in the first trust game but also a significantly stronger trustworthiness reduction after experiencing opportunism and interethnicity in the CPRG game.

Opportunism in Buyer-Seller Relationships: Some Unexplored Antecedents

Abstract: Opportunism is recognized as a key factor that can affect the quality of relationship between buyers and sellers. However, there is a relative lack of research in the antecedents of opportunism. This paper draws upon transaction cost economics and relationship marketing paradigms to propose a conceptual framework involving six potential antecedents. Data from 270 franchisees in a Korea based franchise system is used to test the hypotheses. Results from a structural equation model show that the conflict in a relationship significantly increases franchisee opportunism. Furthermore, conflict mediates the effects of other antecedents in the framework which include alternative attractiveness, goal incongruity, unfairness, transaction-specific investments, and termination cost. The study provides theoretical and managerial insights into understanding and controlling opportunism.

Relationships between Corporate Social Responsibility and Financial Performance: What is the Causality?

Abstract: This study examines the causal relationships between the various dimensions of corporate social responsibility (human resources, human rights in the workplace, societal commitment, respect for the environment, market behavior and governance) and financial performance (return on equity, return on assets, market to book ratio).Research Findings/Insights: This study is based on a sample of 329 listed companies in three geographical areas (the United States, Europe and the Asia-Pacific region) for the years 2009 and 2010. Linear regression analysis and the Granger causality test were used to examine the causal relationships between social responsibility and financial performance. The results show not only that greater social responsibility does not result in better financial performance, but also that financial performance negatively impacts corporate social responsibility.Theoretical/Academic Implications: This study seems to confirm the Managerial Opportunism Hypothesis which postulates that corporate social responsibility has a negative influence on financial performance. In this sense, it contradicts the hypothesis of a virtuous circle, i.e. there is a positive relationship and mutual reinforcement between financial performance and social responsibility.Practitioner/Policy Implications: This study raises questions about the changes that must be made in corporate social responsibility towards greater “shared value”. This implies taking the needs of stakeholders seriously and forming alliances with the various local actors. The challenge is not to protect the environment in which businesses operate, but that businesses, through gaining the respect and esteem of their partners, should enhance their competitiveness. In doing so, companies create economic value by creating social value.

Information Asymmetries as Antecedents of Opportunism in Buyer-Supplier Relationships: Testing Principal-Agent Theory

Abstract: Purpose: A severe problem in supplier selection refers to moral hazard: suppliers not behaving in the expected way once contracted. Principal-agent theory could provide insights on how to reduce this problem. Because buyer–supplier relationships can be interpreted as principal-agent situations, the application of agency theory should facilitate improved supplier selection. Although theoretically compelling, empirical tests verifying this assumption are not prevalent. Regarding the advancement of theory, this paper tests whether both ex ante and ex post information asymmetries influence moral hazard. In particular, in the context of a globalizing economy with a subsequent increase in information asymmetries as a problem in supplier selection, this conceptual approach may be contributive. Design/methodology/approach: The authors use a set of 87 buyer–supplier relationships to conduct a test, applying a partial least squares model with latent variables. A particularity of the data set is that it contains information on ongoing as well as on discontinued relationships. Findings: The analysis indicated that both ex ante information asymmetries (operationalized by a reputation variable) and ex post asymmetries (operationalized by a monitoring variable) have shown to be significant and strong antecedents explaining the occurrence of moral hazard. Interestingly, and opposed to the common assumption, the length of a relationship and the amount of direct meetings have not revealed any explanatory significance. Buyer dependency hardly showed influence on supplier opportunism. Research limitations/implications: Data were collected from a multitude of buyer–supplier relationships from a single firm in the chemical-pharmaceutical industry. Generalizations to other industries still need to be tested. Socially desirable answering behavior cannot fully be excluded because relationship discontinuation is not a desirable situation. In terms of theory implications, this research adds to the notion that both hidden action and hidden intention can lead to moral hazard. Practical implications: An agency-based analysis can be operationalized with the help of an agency-based supplier classification portfolio. It might be of particular value to firms to discuss those suppliers that scored high in risk of opportunism but did not (yet) reveal any signs of moral hazard. Finally, the strong explanatory power of reputation alerts buyers to pay more attention to behavioral information on the (potential) supplier available in the market. Originality/value: Analyzing the occurrence of moral hazard and including terminated relationships adds to the emerging stream of literature on relationship discontinuation in B2B markets. Further, the strong empirical results may encourage researchers to elaborate on principal-agent theory-based assumptions, adding another layer of explanation to buyer–supplier relationships. Findings show that reputation is unduly neglected as supplier selection criterion in current theory and practice.

The interplay of relational governance and formal control in horizontal alliances: : a social contract perspective

Abstract: Governance is critical to an alliance relationship as it aids in curbing opportunism and thus in achieving higher performance. While research suggests relational governance as well as formal control mechanisms as viable means to reduce opportunistic behavior in an alliance relationship, the effectiveness of the interplay of these governance forms remains an important issue. This research addresses this challenge by applying social contract theory to resolve the uncertainties surrounding whether relational governance, exercised by joint actions in the performance measurement process (PMP), can be effectively complemented by the formal control mechanisms of output and process controls. Based on a survey of 197 horizontal alliances of German logistics service providers and using structural equation modeling, we find that if formal control mechanisms are legitimized by underlying agreements, which are established through relational governance (i.e., joint actions), the two governance forms indeed complement each other. However, if no such legitimization through social contracts is present, the complementation is counterproductive. Furthermore, it is shown that opportunism in the setting of horizontal alliances is also detrimental to alliance success.

Opportunism risk in service triads – a social capital perspective

Abstract: Purpose – The authors aim to conceptually show how social capital between service buyer and partner firm in a service triad impacts the service buyer's opportunism risk regarding the service provider's behavior. Design/methodology/approach – The authors draw on social capital theory to conceptually derive propositions on the role of social capital with regard to the antecedents of opportunism in service triads. Findings – Based on literature, the authors show how social capital between service buyer and partner firm decreases the service buyer's opportunism risk regarding the provider's behavior. Structural capital enhances information flows, thus reducing ambiguity. Relational capital reduces ambiguity as well as the service buyer' dependence. Cognitive capital enhances the mitigating effect of relational norms. Research limitations/implications – The authors extend the conceptual perspective on social capital and opportunism risk to triadic environments. Besides empirical validation, a resulting researc...

Who I Am and How I Contract: The Effect of Contractors' Roles on the Evolution of Contract Structure in University-Industry Research Agreements

Abstract: In this exploratory study of university-industry sponsored research agreements, we investigate how organizational roles direct the relational learning of contracting personnel, which subsequently influences contract evolution. Integrating theory with comments from field interviews, we posit that as scientists gain contracting experience with an exchange partner their focus of attention on knowledge creation supports the establishment of a relationship based on technical competence, behavioral experience, and operational routines that cause the enforcement terms of subsequent contracts to become less detailed. We also submit that contract administrators, because of their focus on knowledge protection mitigating opportunism and enforcement, primarily accumulate joint governance experience and establish administrative routines that cause the enforcement terms of subsequent contracts to become more detailed. Rich content analysis of monitoring and intellectual property terms of sponsored research agreements supports our theoretically grounded hypotheses.

Built to Last or Meant to End: Intertemporal Choice in Strategic Alliance Portfolios

Abstract: A salient but rarely explicitly studied characteristic of interfirm relationships is that they can intentionally be formed for finite periods of time. What determines firms' intertemporal choices between different alliance time horizons? Shadow of the future theorists suggest that when an alliance has an explicitly set short-term time frame, there is an increased risk that partners may behave opportunistically. This does not readily explain the high incidence of time-bound alliances being formed. Reconciling insights from the shadow of the future perspective with nascent research on the flexibility of temporary organizations, and shifting the focus from the level of individual transactions to that of strategic alliance portfolios, we argue that firms may be willing to accept a higher risk of opportunism when there are offsetting gains in strategic flexibility in managing their strategic alliance portfolio. Consequently, we hypothesize that environmental factors that increase the need for strategic flexibility—namely, dynamism and complexity in the environment—are likely to increase the relative share of time-bound alliances in strategic alliance portfolios. Our analysis of longitudinal data on the intertemporal alliance choices of a large sample of small and medium-sized enterprises provides support for this argument. Our findings fill an important gap in theory about time horizons in interfirm relationships and temporary organizations and show the importance of separating planned terminations from duration-based performance measures.

How to recover trust in the banking industry? A game theory approach to empirical analyses of bank and corporate customer relationships

Abstract: Purpose – Trust is a crucial element of a viable banking industry. In the corporate market though, the characteristics of the relationships between each corporate customer and the bank is a double-sided problem. Both parties might trust the other or choose to behave opportunistically. The paper aims to discuss these issues. Design/methodology/approach – The authors have analyzed the effects of inter-organizational trust and opportunism on the perception of risk. The paper presents a structural equations model based on a prisoner's dilemma logic to analyze the unique effects of trust between corporate customers and their banks and its corporate customers. Findings – The results based on 252 bank – corporate bank customers relationships reveal an intriguing mixed strategy between trust from one party and opportunism from the other. Research limitations/implications – The implication is that mutual trust seems to reduce the perception of risk in the market while bank opportunism significantly escalates perce...

Factors Influencing Buyer's Trust in Consumer-to-Consumer E Commmerce

Abstract: C2C e-commerce is increasingly being utilized by individuals to buy and sell products to and from one another. With this increase in use comes the need for specific studies regarding C2C e-commerce. This study develops and tests a model of buyer's trust in C2C e-commerce. Examining previous trust models, perceived web site quality, third party recognition, fear of seller opportunism, information asymmetry, and Internet safety training are proposed to influence buyer's trust. Additionally, the age the individual first started using a computer is proposed to moderate the relationship between Internet safety training and buyer's trust. The findings indicate that all variables significantly influence buyer's trust in C2C e-commerce, except Internet safety training and the moderation of age of first computer use. A discussion and conclusion are provided.

Is the high-involvement worker precarious or opportunistic? Hierarchical ambiguities in late capitalism

Abstract: This article addresses the recent trend in critical organization theory and sociological literature to regard employees in creative and high-involvement work as precarious. It does so by tapping into the perennial debate about control and ambiguity in organization studies. Its main contribution is to expand the focus on workers as objects of control to exercisers of control. Drawing on ethnographic material from the creative knowledge work sector, the article argues that structural and discursive developments in late capitalism generate a specific form of ambiguity which is mobilized by both managers and employees in attempts to exploit and control the counterpart. Through careful analysis of hierarchical interactions, it shows how it is highly contextual whether managers or employees come out as �winners� in the game of influence and domination. This means that the study of worker precariousness needs to be combined with the study of its flip side, namely worker opportunism.

The Manufacturing of Markets: Third-party opportunism and the theory of public contracts: operationalization and applications

Abstract: Public contracts seem to be "expensive" and "inefficient" compared to pure private contracts. Higher prices and inefficiencies in the implementation of public contracts result from their specificity and rigidity, which is how public agents limit hazards from third-party opportunism. We present a comprehensible and testable theory of third-party opportunism and its effects on public contracts. We show that, in the presence of third-party opportunism, there exists an equilibrium in which public contracts are specific and rigid, and thus more expensive in their design, implementation, and control than the theoretical first-best in a non-opportunistic world. We use case examples to extend the theory into practical settings and derive empirical implications.

Legal Opportunism, Litigation Risk, and IPO Underpricing

Abstract: We consider the importance of legal opportunism as an explanation for observed litigation following a large sample of initial public offerings (IPOs). We characterize legal opportunism as litigation based on the potential to recover losses after negative stock price developments rather than the legal merits. We find the most important predictors of post-IPO litigation activity (both likelihood and settlement amounts) to be ex post legal stakes (i.e., monetary damages plaintiffs could claim), and the remaining wealth available in the firm. Our results suggest a disturbing role for legal activity and starkly contrast existing models of IPO underpricing that focus on ex ante risk factors.

Determinants of the acquisition of listed versus unlisted firms in different legal and institutional environments

Abstract: The aim of this article is to analyse the determinants of the decision to acquire unlisted rather than listed firms in different legal and institutional environments. We estimate a probit model considering the mergers and acquisitions (M&As) announced by European listed firms (19 countries) that acquires worldwide listed or unlisted firms (36 countries) in the period 2002–2007. Our results show that managerial opportunism is a determinant in the acquisition of listed firms, occurring with greater probability in acquiring countries with low shareholder and minority shareholder protection. Information asymmetry is another relevant determinant that promotes the acquisitions of unlisted firms. Furthermore, the less developed the capital market in the country of the acquired firm, the greater the probability of acquisitions of unlisted firms. This article contributes to the M&A literature by showing that in addition to managerial opportunism and information asymmetry, the legal and institutional environments i...

Risky Businesses? Young People in Informal Self-Employment in Sofia

Abstract: This article studies how perceptions of the risks associated with informal self-employment depend on the interplay between the institutional, structural (network) and cultural embeddedness of economic action. Informal self-employment should create at least three types of risk. The first concerns the possible legal and social sanctions that stem from the illegal character of the entrepreneurial action. The second is related to the complete lack of social security protection among those for whom informal self-employment is their sole employment. The third is connected with the lack of guarantees concerning contract enforcement, which may increase the probability of opportunistic behaviour by business partners and clients. On the basis of a qualitative study of young, highly educated, informally self-employed workers in Bulgaria's capital Sofia, I argue that these risks are compensated by the specific network and cultural embeddedness of the economic action. This compensation takes the form of various types of insurance against risks. Its core is the replacement of the vacuum of institutional-system trust with interpersonal trust. Thus, the specific constellation of institutional, network and cultural embeddedness is able to solve the problem of opportunism, as well as to create the perception that the informally self-employed are faced with not much greater risks than registered self-employed workers.

Augmenting Conflict Resolution with Informational Response: A Holistic View of Governance Choice in Business Process Outsourcing

Abstract: We develop a holistic model of governance choice in business process outsourcing (BPO) that represents a highly information-intensive form of outsourcing. We integrate perspectives from neoinstitutional economics and the information-processing view (IPV) of the firm. We argue that the governance structure in BPO is chosen not only to address opportunism concerns arising from relational uncertainty to and encourage cooperation, as suggested by institutional economics, but also as an informational response to task and relational uncertainty to encourage coordination between exchange partners. Using the lens of IPV, we posit that uncertainty in the outsourced task increases the information requirements (IR) of the BPO relationship, which, in turn, leads to more hierarchical governance structures. We also suggest that in addition to directly influencing governance choice, relational uncertainty, a key construct in transaction cost economics (TCE), increases IR, and hence has an indirect impact on gove...

Conceptualising Construction Disputes

Abstract: Construction dispute resolution is a topical research area. These studies typically start from dispute identification and subject matter is the most commonly used approach. However, this approach does not take account of the contextual factors that may in fact the true causes. This prompts the diagnostic approach. This chapter gives an overview of these two approaches to identify construction disputes. In addition, a third approach that draws on the concepts of bounded rationality and opportunism is proposed. Minefields and manifestations of opportunism in construction contracting in relation to occurrence of construction disputes are also discussed. Accordingly, an anatomy of construction disputes is provided. It is suggested that construction disputes are mostly contractual but can also be speculative where people factor is a major trigger.

Killing Conscience: The Unintended Behavioral Consequences of 'Pay For Performance'

Abstract: Contemporary lawmakers and reformers often argue that ex ante incentive contracts providing for large material rewards are the best and possibly only way to motivate corporate executives and other employees to serve their firms’ interests. This Article offers a specific critique of the “pay for performance” approach. In particular, it explores why, for a variety of mutually-reinforcing reasons, workplaces that rely on ex ante incentive contracts suppress unselfish prosocial behavior (conscience) and promote selfishness and opportunism. The end result may be not more efficient employee behavior, but more uncooperative, unethical, and illegal employee behavior.

The Role of Ownership in Managing Interfirm Opportunism: A Dyadic Study

Abstract: We extend research on transaction cost theory that shows that vertical integration enables firms to protect their investments in exchange relationships better than market mechanisms. However, extant research finds ownership to exacerbate, rather than limit, exchange partner opportunism. Hence, the purpose of this study is to investigate conditions under which ownership can be effective for constraining an exchange partner's opportunism. Using matched dyadic data for 296 hotel brands, we conduct multi-level hierarchical linear modeling and identify conditions under which common ownership limits hotel opportunism. Findings indicate that ownership can limit hotel opportunism when brand headquarters can easily monitor the hotel's activities.

In Time We Trust?: The Effects of Duration on the Dynamics of Trust-Building Processes in Inter-Organizational Relationships

Abstract: Inter-organizational relationships (IORs) have become pervasive in the last quarter of the 20th century. This study is based on the notion that trust serves as a viable means for better comprehension of the underlying dynamics of IORs as it reinforces the positive outcomes and abates the complications due to opportunism and uncertainty. A growing interest of research on trust notwithstanding, studies on the co-evolution of trust, its antecedents, and effects on commitment over time are rather scarce. This study addresses this gap with a new conceptual model of trust incorporating the concept of duration into the process of building trust and commitment within an IOR.

An Agency Theory of the Division of Managerial Labor

Abstract: Should responsibility for strategic planning and execution be assigned to the same manager? Should a firm have a chief operating officer with responsibilities distinct from those of the chief executive officer? How does the division of labor affect managerial opportunism? This paper uses a formal agency-theoretic model to address these questions and present a new theory of the division of managerial labor. Building on Penrose's typology [Penrose E 2009 The Theory of the Growth of the Firm, 4th ed. Blackwell, Oxford, UK], the theory identifies when to assign i entrepreneurial services, which relate to strategic planning and the acquisition of resources, and ii managerial services, which relate to execution, to the same generalist manager rather than to different specialists. The analysis reveals the critical importance of separability, i.e., whether a supervisor can separately observe the outcomes of entrepreneurial and managerial services. If managers and their supervisor have symmetric information about separability, hiring a generalist dominates because managerial services, which are easier to assess, reduce the scope for opportunism associated with entrepreneurial services, which are harder to assess. Conversely, if managers have better information regarding separability and the probability of separability is low, hiring specialists dominates because hiring a generalist allows the potential for opportunism associated with entrepreneurial services to contaminate the provision of managerial services. Even so, the benefits of hiring a generalist may be restored if the services are sequenced appropriately. An implication of such sequencing is that a firm will grow in fits and starts, giving rise to a "Penrose effect" even if labor market frictions do not impede the assimilation of new managers.

Third-Party Opportunism and the Theory of Public Contracts: Operationalization and Applications

Abstract: Public contracts seem to be "expensive" and "inefficient" compared to pure private contracts. Higher prices and inefficiencies in the implementation of public contracts result from their specificity and rigidity, which is how public agents limit hazards from third-party opportunism. We present a comprehensible and testable theory of third-party opportunism and its effects on public contracts. We show that, in the presence of third-party opportunism, there exists an equilibrium in which public contracts are specific and rigid, and thus more expensive in their design, implementation, and control than the theoretical first-best in a non-opportunistic world. We use case examples to extend the theory into practical settings and derive empirical implications.