Effects of Contract Ambiguity in Interorganizational Governance
Dr. ZHENG Xu
Department of Marketing
College of Business
City University of Hong Kong
This work introduces the concept of contract ambiguity from the law literature into the interorganizational governance literature and examines the strategic role contract ambiguity plays in governing interorganizational relationships. Examined within the context of franchising, this work presents a three-study, multi-method design and empirically establishes the construct of contract ambiguity of franchisor obligations, providing new insights into the strategic design of contracts and their outcomes. In the first study, construct validity is established by demonstrating that contract ambiguity of franchisor obligations is distinct from contract specificity and contract completeness of franchisor obligations, having differential outcomes. Then, in studies two and three, the work demonstrates that contract ambiguity of franchisor obligations increases an interest-based over a rights-based conflict solving approach, implying greater cooperation and joint problem solving, and reduces franchiseeinitiated litigation. The findings also indicate that while contract ambiguity of franchisor obligations decreases franchisee-initiated litigation, this effect is amplified by higher levels of franchisor training programs, but mitigated by the presence of a franchisee association. Implications for academics and practitioners are discussed.
Xu Vivian Zheng is an Associate Professor in Department of Marketing, College Business of City University of Hong Kong. She received her Ph.D. in Marketing from University of Wisconsin-Madison. Vivian’s research interest lies in understanding how firms may employ various relationship governance mechanisms (e.g., contracts) to govern interorganizational relationships (e.g., franchising) properly, so as to reduce conflicts and to enhance trust. In addition, her recent research studies how GIS-informed location choices impact firms’ financial performance and survival. Vivian has published in leading marketing and business journals such as Journal of Marketing, Journal of Marketing Research, Journal of Operations Management, Journal of the Academy of Marketing Science, and Journal of Retailing, etc. She has also published in Law Journals such as Alabama Law Review. Vivian has been actively serving as reviewers for a number of marketing and business journals.
[ Back ]