Mitigating risk: an examination of the antecedents to partner satisfaction in contractual agreements

Abstract

How can organizations in contractual engagements mitigate their risk and increase partner satisfaction when the engagement may not last long enough to forge ‘traditional’ bonds of trust? We investigate perceptions of contract specificity, organizational similarity, contract monitoring costs, operational flexibility and fair treatment as antecedents to partner satisfaction. We empirically test our hypotheses using data collected on 72 contractual engagements from Canadian consulting engineering firms. Our results indicate that firms are likely to be more satisfied when they partner with organizations with which they have had a previous satisfying experience. Furthermore, written contracts with overly excessive specifications can have a negative effect on satisfaction.