Interaction effects between contract specificity, competence trust and goodwill trust upon supplier opportunism and relational stability

Purpose This study was designed to offer empirical evidence about the significant impacts of supplier opportunism and relational stability upon restaurant performance. This study aims to investigate the extent to which competence and goodwill trust interact with contract specificity in mitigating supplier opportunism and improving relational stability. Design/methodology/approach This study obtained a data set using 324 account executives representing a US restaurant product supplier. These same account executives were also contacted to obtain data from general managers of their largest restaurant accounts. Structural equation modeling was used to assess the hypothesized relationships. Additionally, a two-step hierarchical regression analysis was used to test how contract specificity and trust interact upon supplier opportunism and relational stability. Findings Results revealed that contract specificity, competence and goodwill trust significantly reduced supplier opportunism and improved relational stability, which positively affected restaurant performance. Additionally, the interaction between contract specificity and goodwill trust significantly reduced the level of supplier opportunism, supporting the complementary role of goodwill trust for contract specificity. When goodwill trust interacted with contract specificity, it was found to significantly improve relational stability. Practical implications These results offer empirical evidence pertaining to the significant impacts of supplier opportunism and relational stability upon restaurant performance. Findings can be used to develop effective governance strategies to manage restaurant-supplier transactions. Originality/value Although the interaction between contract specificity and trust with respect to decreasing supplier opportunism and promoting relational stability has been a subject of debate in the supply chain management research literature, to date, no relevant research addressing this topic exists within the context of restaurant management. In this study, trust was particularly assessed based upon its two distinct roles (competence and goodwill) involving their interaction with contract specificity upon supplier opportunism and relational stability. The findings regarding those different roles of the two types of trust provide new insights into the existing knowledge about the use of both formal and informal governance specific to the restaurant industry.