Because partners may behave opportunistically in alliances, contractual safeguards or trust between partners are necessary for successful outcomes. However, it remains controversial whether safeguards and trust substitute or complement each other. Drawing on transaction cost theory, this study conceptualizes both contractual safeguards and trust as important control mechanisms in non-equity alliances, and develops a model that relates contractual safeguards and trust to cooperative outcomes. We test our hypotheses with data collected from 233 architect–contractor partnerships in Hong Kong. The results show that the relationship between contractual safeguards and cooperative outcomes depends on both the level and type of trust.

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Firms simultaneously face the need to cooperate with and control an alliance partner. To complement the transaction cost perspective's emphasis on the need to control and limit opportunistic behavior, we examine the sources and impact of the cooperation costs incurred in order to work with a partner. We propose that these costs increase with greater joint task complexity and interpartner diversity, and perceptions of equitable behavior affect the perceptions of these costs. Hypotheses derived from the framework are tested in a sample of 231 contractual alliances between architects and general contractors in the Hong Kong construction industry. We find that both cooperation costs and transaction costs affect the level of time and effort a manager expends on an alliance, supporting our fundamental proposition that the costs of cooperation and control are conceptually and empirically distinct. We argue that cooperation costs should be incorporated into studies that compare the choice of alternative partners and alliance structures, as well as among the broader categories of market, hierarchy, and hybrid governance forms. Copyright © 2005 John Wiley & Sons, Ltd.

An action pattern model was developed and applied to the examination of inter-firm cooperative processes. The model considered cooperation as a continuous cycle of actions and reactions between cooperating partners. The building blocks of the model include cooperative equilibrium, disruptive events, action types and action patterns. Three action pattern variables were proposed to describe the interactions. It was hypothesized that action patterns are contingent on partner relationships and the transaction cost characteristics of a partnership. The hypotheses were tested on a sample of 263 partnerships in the construction industry in Hong Kong. The quantitative study was supplemented by four in-depth case studies. The results show that: (1) trust was an important antecedent of action patterns; and (2) transaction cost variables moderate the relationships between partner relationships and action patterns. These findings suggest that future research should give more attention to the interaction of partners during cooperation.