Institutions and opportunism in buyer-supplier exchanges: the moderated mediating effects of contractual and relational governance

The marketing channel literature has paid limited attention to institutional environments that constrain buyer-supplier exchanges, though such institutions are fundamental determinants of transaction costs, and thus of the occurrence of opportunism in the buyer-supplier dyads. Drawing on transaction cost economics and institutional theory, this study uncovers the critical influence of formal and informal institutions (i.e., legal effectiveness and networking expenditure) on the use of governance in deterring opportunism, as well as the moderating role of government support on the efficacy of governance mechanism. The findings from a buyer-supplier dyadic survey and 2secondary datasets reveal that legal effectiveness mitigates opportunism through increased use of both contractual and relational governance; in contrast, networking expenditure reduces opportunism through relational governance, yet increases opportunism via lowering contractual governance. In addition, contractual governance is more efficient in constraining opportunism when government support is high, whereas relational governance deters opportunism more when government support is low. These findings offer important implications for academic research and managerial practice.