Explicit and normative contracting in collaborations of varying magnitudes: Differing perspectives of component suppliers and original equipment manufacturers

Industrial component suppliers and original equipment manufacturers utilize explicit and normative contracting to facilitate effective collaboration so as to garner joint profits. However, although collaborations vary in magnitude, research have yet to examine how these governance mechanisms may vary across collaborations of differing magnitudes, especially when considering the effects given differences in the longevity of firms' relationships. The results of a two study, empirical analysis employing structural equation modeling indicates that (1) component suppliers and original equipment manufacturers regard explicit and normative contracting as full and distinctive mediators of the relationship between collaborative magnitude and joint profits, and (2) that the longevity of the relationship between the firms moderates the effects of collaborative magnitude on explicit and normative contracting. Furthermore, between-group analyses indicate that component suppliers and original equipment manufacturers regard the effects of collaborative magnitude on explicit and normative contracting differently, and their perceptions of the effects of each contracting form on joint profits also differs.