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An integrated anti-opportunism system in international exchange

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Abstract

Building on economic and social exchange theories, this study develops an integrated model in which curtailing opportunism in international joint ventures (IJVs) requires four interrelated sets of suppressing forces: (1) contractual ordering (contractual inclusiveness and contractual obligatoriness); (2) structural ordering (managerial governance and equity captiveness); (3) relational ordering (interparty attachment and boundary-spanner ties); and (4) justice ordering (procedural justice and distributive justice). Using a sample of 192 IJVs in an emerging market, this study finds general support for our theoretical model. Our research validates that countering opportunism involves a system-wide effort that integrates economic and social mandates, unifies ex ante and ex post mechanisms, controls both egoistic and non-egoistic motivations, and combines organizational-level and individual-level forces. For partners from individualist cultures, economic ordering forces (contractual and structural) are stronger than social ordering forces (relational and justice) in relation to opportunism resistance, whereas for partners from a collectivistic culture, social ordering forces are relatively stronger than economic ordering forces for this end.

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Notes

  1. Another economic theory frequently used to explain opportunism is game theory. In particular, the structure of the prisoner's dilemma closely resembles the structure of the interparty relationship between strategic IJV partners. Opportunism is likely to be prevalent in a repeated game that is played a known or finite number of times. Contrarily, the interest of both parties is best served by adopting a position of cooperation and trust in an infinitely repeated game. Known as a non-cooperative equilibrium, this position can be achieved without the parties discussing their plans in advance.

  2. ‘Contract’ here broadly refers to the main body of an IJV contract or agreement as well as all related supplements and appendices.

  3. Since there is a growing consensus that procedural justice and interactive justice are separate concepts (see Bies, 2001), and we already included interpersonal ties between boundary spanners as an element of relational ordering (see Figure 1), we did not include interactive justice elements (social and interactional aspects of decision implementation) in the definition and measurement of procedural justice, nor did we additionally examine interactive justice. The latter involves perceived fairness of the nuances of interpersonal treatment, which emerged to specifically represent the interpersonal aspect of justice and communication during the enactment of procedural justice (see Bies, 2001; Tyler and Bies, 1990).

  4. We also calculated and analyzed cultural distance index based on Schwartz's (1994) country scores. The results about the effect of cultural distance on opportunism based on Hofstede's country scores and on Schwartz's country scores were similar in our sample.

  5. The variable was re-scored around the mean, that is, ct i =t i −t i ′, where ct i is the new score of variable t i after using the mean centering technique, t i is its original score, and t′ i is its mean.

  6. Although our cross-sectional and nonrecursive data did not allow us to find confident causality, we tried some empirical efforts to assess some possible causal influence. In June 2005 (about 2 years after the main survey), we sent the same questionnaire to 50 CEOs in IJVs in Suzhou, who responded in the earlier survey. Based on 38 responses received and using a covariance structure model, we compared the overall fit of the two models: (1) ordering forces in an earlier survey (T1) → opportunism in a later survey (T2); and (2) opportunism at T1 → ordering forces at T2. The result shows that model fit estimates (chi-square, GFI, and the normed-fit index) and most individual coefficients in Model 1 are stronger than those in Model 2 (applied to both foreign and Chinese parties).

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Acknowledgements

The author would like to thank Professor Arie Y Lewin and three anonymous reviewers for their insightful comments. This project was funded by a research grant provided by the School of Business Administration, University of Miami.

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  1. Department of Management, University of Miami, Coral Gables, FL, USA

    Yadong Luo

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Accepted by Arie Y Lewin, Editor-in-Chief, 26 March 2007. This paper has been with the author for two revisions.

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Table a1 Major variables and measurement
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Luo, Y. An integrated anti-opportunism system in international exchange. J Int Bus Stud 38, 855–877 (2007). https://doi.org/10.1057/palgrave.jibs.8400300

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