The effect of cultural differences on the relationship between contract governance and opportunism

PurposeThe purpose of this study is to determine the dimensions of cultural differences, which are theoretically most relevant to contract functions in international marketing. Moreover, the contradiction between contract governance and opportunism is reconciled by exploring the boundary conditions of specific cultural differences. Design/methodology/approachThe authors obtained 235 bilateral data provided by Chinese exporters and overseas distributors. The authors matched a secondary data set with the questionnaire data, which were analyzed by confirmatory factor analysis and a hierarchical moderation model. FindingsThe results demonstrate that while contract specificity is less successful in this area, contingency adaptability is useful in reducing opportunism. Moreover, as the national cultural differences regarding uncertainty avoidance, power distance or individualism-collectivism become more pronounced. One contractual dimension will be more effective at curbing opportunism, while the other will be less effective. Research limitations/implicationsDespite sample limitations, to the best of the authors' knowledge, this paper is the first to theoretically identify the effect of cultural difference dimensions in contract governance, unlike past studies taking cultural differences as an aggregated variable. Furthermore, by exploring the boundary conditions of cultural differences, this paper effectively reconciles the conflicting findings on the relationship between contract governance and opportunism in various cultural context. Practical implicationsExporters' managers can design contingency adaptability to complement the limitations of contract specificity and consider cultural differences' contingency effects. Originality/valueFirst, the authors identify cultural differences dimensions related to contract governance, refining and emphasizing the research context. Second, comparing the efficacy of contract specificity and contingency adaptability in specific cultural context can show which contract is better at preventing opportunism.