Environmental uncertainty, specific assets, and opportunism in 3PL relationships: A transaction cost economics perspective

Service provider opportunism is a serious concern in third party logistics (3PL) relationships. However, our knowledge about the antecedents of 3PL providers' opportunism is limited. According to transaction cost economics (TCE), increased transaction costs cause opportunism. This study incorporates key TCE constructs (environmental uncertainty, specific assets, and opportunism) and conducts a transaction cost analysis. We argue that environmental uncertainty and specific assets create exchange hazards that result in opportunism. Meanwhile, specific assets reduce coordination costs raised by environmental uncertainty. Building on these arguments, this study tests a model that hypothesizes that environmental uncertainty (demand, supply, and technology uncertainty), and specific assets (user- and provider-specific assets) are positively related to opportunism, and that environmental uncertainty is positively related to specific assets. Structural equation modeling is used to examine data from 247 3PL relationships in China. The results show that demand uncertainty decreases opportunism, supply uncertainty increases opportunism, and technology uncertainty does not have a significant effect. User-specific assets increase opportunism, while provider-specific assets decrease opportunism. Demand and supply uncertainty have positive effects on user-specific assets, but non-significant effects on provider-specific assets, while technology uncertainty does not have a significant impact on user or provider-specific assets. In general, our findings are supported by the rationale of TCE, and industrial or cultural factors can explain several surprising findings. This study contributes to 3PL literature and practice.