The contingent effects of asset specificity, contract specificity, and trust on offshore relationship performance

Abstract

Drawing on the perspectives of interfirm governance mechanisms, we develop a contingency theoretical framework that examines how contract specificity and trust interact with local suppliers' physical asset specificity and human asset specificity in shaping the relationship performance of offshore cooperation between local suppliers and global buyers. The empirical data for hypothesis testing were collected from a survey of 162 dyads composed of Chinese local suppliers and international buyers. The empirical results reveal an inverted U-shaped relationship between physical asset specificity and relationship performance, and this inverted U-shaped relationship is stronger when the level of contract specificity is higher. There is a linear and positive relationship between human asset specificity and relationship performance, and this relationship becomes stronger when the level of trust between the local supplier and international buyer is higher.