Contract Types, Institutional Distance and Operational Performance: Evidence from Global Trade Flows in the LNG Industry

Abstract

In this study, we examine the relationship between contract types, institutional distance and operational performance in the context of cross‐border trade in the liquefied natural gas (LNG) industry. Drawing on the buyer–supplier long‐term relationships literature, we argue for a negative link between short‐term contractual agreements and operational performance. Further, drawing insights from institutional theory, we contend that a high level of formal and informal institutional distance between the origin (i.e. supplier) and destination (i.e. buyer) countries reduces operational performance. We also argue that formal and informal institutional distance mitigates the negative effect of short‐term contracts on operational performance. Finally, we draw on the role of ‘asymmetry in distance’ by examining the direct and moderating effect of both the relevance and direction of formal institutional distance. We test our assumptions using LNG global trade flows from 39 source countries to 44 destination countries over the 2008–2017 period (a total of 17,447 shipments). Our study extends our knowledge on the operational performance implications of buyer–supplier relationships and stresses the important role formal and informal institutional distance plays as a direct and moderating effect on this relationship.

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

“…Institutions differ between countries, such institutional differences can create costs or opportunities associated with the efficient and effective development and implementation of marketing activities (Mitra and Golder, 2002; Solberg, 2008). In the IM domain, institutional differences are considered as a key factor affecting the contractual efficacy (Batsakis et al , 2022), which is defined as the effect of a contract adopted by a firm to achieve a certain purpose (Crosno et al , 2021). Firms can avoid the contractual inefficiencies arising from institutional differences by learning the written laws and regulations of the host country.…”

Understanding interdependency of sustainability dimensions from the lens of collaborative relationship conditions: findings from an emerging economy

“…Extant literature (Baird et al, 2012;Meena et al, 2023;Melander and Tell, 2019;Rodrigo et al, 2016;Sancha et al, 2016;Yang et al, 2020;Zacharia et al, 2011) highlighted relationship conditions, such as inventory information sharing, dependency on supply chain partners for sustainability (Awaysheh and Klassen, 2010;Cao and Zhang, 2011;Zacharia et al, 2011), opportunistic behavior, power asymmetry and conflicts (Batsakis et al, 2023;Chkanikova, 2016;Chowdhury et al, 2022;Madichie and Yamoah, 2017), as critical collaborative relationship conditions that can influence TBL performance positively or negatively. Relationship conditions are either positive or negative.…”

“…Relationship conditions are either positive or negative. Previous literature mainly studied positive relationship conditions, such as trust, commitment (Batsakis et al, 2023;Su et al, 2013), information sharing and contracts. Negative relationship conditions may be more detrimental, yet they are an under-researched topic (Batsakis et al, 2023) in logistics and operations literature.…”

“…Previous literature mainly studied positive relationship conditions, such as trust, commitment (Batsakis et al, 2023;Su et al, 2013), information sharing and contracts. Negative relationship conditions may be more detrimental, yet they are an under-researched topic (Batsakis et al, 2023) in logistics and operations literature. More so, very little research has analyzed positive and negative relationship conditions and investigated how their presence may alter the effectiveness of the linkages between the TBL performance.…”

“…For example, positive relationship conditions such as inventory information sharing (Barcos et al, 2013;Cao and Zhang, 2011;Treitl et al, 2014), coordination (Li et al, 2022), trust, commitment (Chowdhury et al, 2022Hou e and Duchamp, 2020), cultural intelligence and negative relationship conditions, such as interdependency (Fan et al, 2020;Johnsen and Lacoste, 2016), opportunistic behaviors (Baird et al, 2012;Madichie and Yamoah, 2017;Rodrigo et al, 2016), power asymmetry (Chkanikova, 2016;Sarkis et al, 2011;Zhuang et al, 2010) and conflict (Cheng and Sheu, 2012;Melander and Tell, 2019;Zhuang et al, 2010), are considerably highlighted in the literature of operations, logistics and supply chain relationships. Extant literature is mainly focused on positive relationship conditions and negative relationship conditions were largely under-researched (Batsakis et al, 2023). These primary relationship conditions are usually present in all collaborative relationships and influence SSCP and its strategy.…”