Int. J.

Production Economics 182 (2016) 293303

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Int. J. Production Economics

journal homepage: www.elsevier.com/locate/ijpe

Curbing opportunism in logistics outsourcing relationships:

The role of relational norms and contract
Baofeng Huo a, Dijia Fu a, Xiande Zhao b,n, Jingwen Zhu c
a

School of Management, Zhejiang University, Hangzhou, China

China Europe International Business School, Shanghai, China
c
School of Management, Xian Jiaotong University, Xian, China
b

art ic l e i nf o

a b s t r a c t

Article history:
Received 9 November 2015
Received in revised form
5 February 2016
Accepted 16 May 2016
Available online 5 July 2016

Logistics outsourcing, as a strategy to obtain competitive advantages, is prevalent in today's business

world. However, we know little about logistics outsourcing, especially with regard to opportunistic behavior types and their relational antecedents (e.g., contracts and relational norms) of their opportunism
in the third party logistics (3PL) user-provider relationships in emerging economies. Using China's developing 3PL industry as a research context, and social exchange theory and transaction cost economics
as the theoretical lenses, we examine how three dimensions of relational norms (information exchange,
exibility, solidarity) inuence two dimensions of contracts (detailed contracts, contract application),
and how relational norms and contracts simultaneously inuence 3PL providers opportunism. Using
data collected from 247 manufacturing and service rms in China, we empirically test the proposed
model and nd that detailed contracts and solidarity are effective safeguards in reducing 3PL providers
opportunistic behavior, while the contract application process leads to opportunism. Furthermore,
exibility is positively related to detailed contracts and the contract application process, which can inuence 3PL providers opportunism negatively and positively, respectively. This study contributes to the
logistics outsourcing, opportunism, and relationship management literature and provides managerial
implications for 3PL practices in China.
& 2016 Elsevier B.V. All rights reserved.

Keywords:
Logistics outsourcing
Relational norms
Contracts
Opportunism
China

1. Introduction
Increasing global competition and escalating customer expectations have led companies to concentrate on their own core
competencies to achieve high levels of customer service with low
costs. Outsourcing, such as logistics outsourcing to third-party
logistics (3PL) providers, is an important strategy for supporting
core competencies (Lai et al., 2012; Vaidyanathan, 2005). From a
transaction cost economics (TCE) perspective, stable long-term
logistics outsourcing relationships help 3PL providers and users
reduce costs and gain competitive advantages. However, the opportunism in logistics outsourcing relationships hinders both
partners from maintaining a cooperative relationship and achieving competitive advantages.
Opportunism, dened as self-interest seeking with guile (Williamson, 1985), and its governance mechanisms have received a
signicant amount of research attention. Among the various
n
Corresponding author at: China Europe International Business School,
Shanghai, China.
E-mail addresses: baofeng@zju.edu.cn (B. Huo), everfudj@zju.edu.cn (D. Fu),
xiande@ceibs.edu (X. Zhao), ona12zhu@sina.com (J. Zhu).

http://dx.doi.org/10.1016/j.ijpe.2016.07.005
0925-5273/& 2016 Elsevier B.V. All rights reserved.

governance mechanisms, contracts, as a transactional mechanism

based on TCE, and relational norms, as a relational mechanism
based on social exchange theory (SET), are effective safeguards
against opportunism. Contracts hinder opportunism through
providing detailed specications on transactions (Wuyts and
Geyskens, 2005) and through law enforcement (Liu et al., 2009).
Relational norms reduce opportunism directly (Crosno and Dahlstrom, 2008), through promoting mutually benecial behavior
(Achrol and Gundlach, 1999) or developing trust (Lai et al., 2012).
To the best of our knowledge, most studies only focus on relational
norms (Grifth and Myers, 2005; Lai et al., 2012; Tangpong et al.,
2010; Zhang et al., 2003) or contracts (Luo, 2002; Wuyts and
Geyskens, 2005), while others examine how these two mechanisms work together without using specic dimensions of the
concepts (Luo, 2007b; Poppo and Zenger, 2002; Wang et al., 2011;
Wu et al., 2015). Because of contractual incompleteness, more and
more studies are looking for more effective ways to curb opportunism. Recent studies have found that contracts and relational
norms curb opportunistic behavior more effectively when they are
implemented jointly than individually (Antia and Frazier, 2001;
Barthlemy and Qulin, 2006; Cao and Lumineau, 2015; Kessler
and Leider, 2012; Liu et al., 2009; Luo, 2007b; Poppo and Zenger,

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B. Huo et al. / Int. J. Production Economics 182 (2016) 293303

2002). However, there are varying opinions on the relationship

between contracts and relational norms. In contrast to substitution
(Kessler and Leider, 2012) and complementation (Poppo and
Zenger, 2002), we argue that relational norms inuence contracts
because the norms can reinforce relationships and affect the behavior of the partners (Antia and Frazier, 2001; Huo et al., 2015;
Wang et al., 2011; Wu et al., 2015; Yang et al., 2016). Contracts can
be classied into two dimensions, detailed contracts and the
contract application process, while relational norms can be classied into three dimensions, information exchange, exibility, and
solidarity (Heide and John, 1992). How the three dimensions of
relational norms and two dimensions of contracts simultaneously
inuence opportunism and how the different dimensions of relational norms inuence different dimensions of contracts have yet
to be investigated.
In this study, we use China's developing logistics outsourcing
industry as a research context. China's total logistics expenditure
experienced average annual growth of 25% from 2000 to 2008,
thereby playing an important role in China's economic development (Wang et al., 2008, 2010). The share of logistics outsourcing
in China's logistics industry is predicted to increase to 23% (Lai
et al., 2008). Moreover, China's weak legal systems in the emerging
logistics outsourcing industry, and unique national culture characterized by guanxi, collectivism, and long-term orientation
(Zhao et al., 2008), provide a rich background for studying the
issues related to opportunism, relational norms, and contracts in
China.
In this study, based on TCE and SET, we aim to investigate the
relationship between relational norms, contracts, and opportunism in logistics outsourcing relationships in China from the perspective of 3PL users. Specically, our major research objectives
are to empirically test the effects of all of the dimensions of relational norms and contracts on opportunism, and the effects of
relational norms on contracts, in the context of the emerging logistics outsourcing industry in China. This study contributes to the
literature in several ways. First, this study adds to the logistics
outsourcing literature by providing empirical evidence of the effects of contracts and relational norms on the opportunism in the
logistics outsourcing industry. Second, this study adds to the opportunism literature by indicating how contracts and relational
norms, as governance mechanisms, curb opportunism. Third, this
study contributes to the relationship management literature by
examining the effects of relational norms on contracts. This study
also offers guidelines for managers to mitigate the opportunism in
logistics outsourcing relationships through contracts and relational norms.
The remainder of this study is organized as follows. In the
following section, we review the literature and describe our research hypotheses. In Section 3, we present the research methodology, followed by our analyses and results in Section 4. We
discuss the managerial implications of our ndings in Section 5.
Finally, Section 6 presents our main conclusions, together with the
limitations and suggestions for future research.

2. Literature review and research hypotheses

After reviewing the multi-disciplinary literature related to opportunism, contracts, and relational norms, we developed the
conceptual framework outlined in Fig. 1.
2.1. Opportunism
Opportunism, which is dened as self-interest seeking with
guile (Baumol and Williamson, 1985), includes lying, stealing,
cheating, and more subtle forms of deceit, such as not fully

Contract

Relational
norms

Opportunism
Fig. 1. Conceptual framework.

disclosing information or violating implicit agreements (Rindeisch and Heide, 1997). There are two types of opportunistic
behavior; shirking, which refers to intentional but passive behavior such as deliberately underperforming or withholding resources, and poaching, which means that one of the members
takes advantage of certain relationship specic resources to pursue
its own interests (Huo et al., 2015). In logistics outsourcing relationships, the opportunism of 3PL providers is dened as behavior aimed at seeking their own unilateral gain at the substantial expense of logistics users by breaching a contract or
agreements, distorting information, withdrawing commitment,
shirking obligations, or similar actions (Lai et al., 2012). Inter-organizational exchanges are characterized by a high risk of opportunism, which increases the transaction costs (Handley and Benton, 2012) and uncertainties, and disrupts collaboration (Luo,
2006). For example, 3PL providers opportunistic behavior pushes
3PL users to invest in the relationship to safeguard against the
hazards of opportunism (Luo, 2007a), which may result in conict
(Birnberg, 1998; Hawkins et al., 2012; Jap and Ganesan, 2000) and
damage the quality of the outsourcing relationship (Lai et al.,
2012). Therefore, it is imperative for 3PL users to establish governance mechanisms that safeguard against 3PL providers opportunism to reduce transaction costs and maintain stable longterm logistics outsourcing relationships (Benton and Maloni, 2005;
Carr and Pearson, 1999; Hawkins et al., 2012; Jap and Anderson,
2003).
2.1.1. Contracts and opportunism
Contracts, as a transactional mechanism based on TCE, are a
formal tool for mitigating opportunism (Williamson, 1985). Contracts provide a legally bound, institutional framework in which
each party's rights, duties, responsibilities are codied (Luo, 2002;
Wang et al., 2011). A contract species the content of the transaction, the exchange members' roles and behavior, and the penalties for violating the contractual specications in rigid and
tangible clauses. Contracts can be classied into two dimensions:
detailed contracts and the contract application process (Faems
et al., 2008; Wuyts and Geyskens, 2005), based on the processes of
the contracts in 3PL exchange relationships. Detailed contracts,
acting as an output control, address the nal results, whereas the
contract application, acting as a form of process control, focuses on
how the nal results are reached (Jaworski et al., 1993; Wallenburg
and Schfer, 2014).
Detailed contracts are formulated before the companies engage
in transaction, whereas the contract application occurs after the
transaction is underway. Detailed contracts explicitly stipulate the
outcomes to be delivered, roles and responsibilities to be performed, adaptive processes to be used for resolving unforeseeable
outcomes, and penalties to be adopted for violating contractual
behavior before any exchange takes place (Lusch and Brown, 1996;
Poppo and Zenger, 2002; Wuyts and Geyskens, 2005). Detailed
contracts establish a vertical inter-rm authority that guides behavior (Wuyts and Geyskens, 2005), and set legally enforceable
terms that mitigate uncertainty and bring clarity (Pan and Tse,
2000; Steensma et al., 2000). According to TCE, drafting a detailed
contract reduces opportunism (Dahlstrom and Nygaard, 1999;
Williamson, 1985) mainly by clarifying mutual expectations, increasing the awareness of duties and responsibilities, and

B. Huo et al. / Int. J. Production Economics 182 (2016) 293303

diminishing the grey zone (Das and Bing-Sheng, 1998; Luo,

2002). Detailed contracts provide clearly articulated rules and
procedures for inter-rm exchange, and thus limit the domain of
3PL providers' opportunism (Wuyts and Geyskens, 2005). For example, the precise denition of key performance indicators, such
as price, delivery, lead-time, and damage rate, reduce the likelihood that 3PL providers will offer low quality logistics services to
further their own unilateral interests. A detailed contract codies
the terms relating to how to handle various future situations,
thereby reducing the uncertainty with respect to each party's
behavior and outcomes (Lusch and Brown, 1996; Wang et al.,
2011). Hence, detailed contracts reduce the likelihood of 3PL
providers engaging in opportunistic behavior. In particular, detailed contracts offer a way to prevent opportunistic behavior
through specifying the punishments and costs of self-interested
activities (Luo, 2002; Zhou and Xu, 2012). Therefore, we
hypothesize:
H1a. Detailed contracts are negatively related to 3PL providers'
opportunism.
The contract application process serves to monitor, control,
assess, and penalize exchange members using formal and compulsory means to decrease and prevent unexpected outcomes
after the transaction is underway. It also emphasizes activities to
check and evaluate members' performance, and to penalize the
violation of contractual behavior based on strict pre-specied
terms during the process of the exchange. The application of the
contract obligates members to perform to the literal terms of the
contract by means of legal enforcement or institutional power,
which hinder 3PL providers' engagement in opportunism. For instance, 3PL users can monitor, control, and assess the 3PL providers during the contract application process, and regularly examine and appraise the providers' products and performance
based on the pre-specied contracts, thereby reducing the likelihood of cheating, lying, and stealing. Moreover, 3PL users have
the right to penalize 3PL providers if they breach a contract, which
serves as an effective tool for preventing future possible opportunism that violates the contractual terms, such as the providers
not meeting the dened key performance indicators. The penalties
for 3PL providers' opportunism have a negative reinforcement
effect according to Skinner's reinforcement theory. Therefore, we
hypothesize:
H1b. The contract application is negatively related to 3PL providers opportunism.
2.1.2. Relational norms and opportunism
From the perspective of TCE, partners may choose market or
hierarchical mechanisms to govern their exchanges. However,
because pure market transactions are rare (Macneil, 1980), partners gradually pay more attention to the maintenance of relationships and tend to use relational norms as a governance
mechanism (Liu et al., 2009; Luo, 2006; Zhang et al., 2003). The
transactional difculties caused by geographic distance and organizational cultural differences also highlight the importance of
relational norms (Zhang et al., 2003). As a relational mechanism
based on SET, relational norms are a specic subset of norms related to the mutual expectations of the behavior and interests of
all exchange members that are accepted by the relevant decisionmakers in the relationship (Aulakh et al., 1996; Heide and John,
1992; Lai et al., 2012; Tangpong et al., 2010). The core of these
norms is the creation of a social environment in which the common values, priorities, rules, and norms for maintaining the relationship are shared among exchange partners (Grifth and
Myers, 2005; Lai et al., 2012; Tangpong et al., 2010). The relational
norms within a relationship establish the scope of the permissible

295

limits on behavior in a exible and intangible way instead of relying on explicit items and clauses (Grifth and Myers, 2005;
Heide and John, 1992; Lai et al., 2012).
Relational norms can be classied into three dimensions, information exchange, exibility, and solidarity, which are commonly used but partially overlapping factors (Heide and John,
1992; Kaufmann and Stern, 1988; Macneil, 1980). Information
exchange is dened as the bilateral expectation that the parties
will proactively exchange information. It provides a safeguard for
3PL providers and users in the sense that each party can expect the
other to provide unforeseen information that may affect their
operations, which enables both partners to cope better with the
vulnerability related to environmental uncertainty (Heide and
John, 1992; Zhang et al., 2003). Flexibility is dened as the bilateral
expectation of the willingness to make adaptations in response to
changes in circumstances (Heide and John, 1992). For 3PL providers and users, this indicates that the relationship will be subject
to modication if a prescribed practice proves detrimental to the
relationship (Heide and John, 1992; Zhang et al., 2003). Solidarity
is dened as the bilateral expectation that a high level of cooperative value is placed on the relationship (Heide and John,
1992), which deters both partners from behaving in ways that
jeopardize the continuity of the relationship (Heide and John,
1992; Zhang et al., 2003). This reects the extent to which the
partners will seek to preserve their ongoing relationship (Kaufmann and Stern, 1988).
The relational norm of proactive bilateral information exchange
(Heide and John, 1992; Lai et al., 2012) can reduce 3PL providers'
opportunism in logistics outsourcing relationships. First, according
to TCE, 3PL partners may be subject to opportunistic behavior,
such as cheating, lying, and other violations of agreements due to
the information asymmetry in the logistics outsourcing relationships (Handley and Benton, 2012; Williamson, 2008). Information
exchange can help both partners to effectively enhance the
transactional visibility and avoid information asymmetry (Ju et al.,
2011; Yao et al., 2009). Second, because communication helps to
reduce misunderstandings and conicts (Aulakh et al., 1996), information exchange can foster trust (Moorman et al., 1993; Morgan and Hunt, 1994), which effectively curbs opportunism because
trust can help to strengthen both partners' cooperative intentions
(Gulati, 1995; Wu et al., 2007). Third, information exchange can
enhance group harmony and the cohesion among partners (Wu
et al., 2007), especially in the collectivist, high power distance
cultures in places such as China and Japan, in which information
sharing, group harmony, and cohesion are emphasized (Hofstede
and Hofstede, 2001). The high levels of group harmony and cohesion can reduce the tendency to engage in opportunistic behavior. Therefore, we hypothesize:
H2a. Information exchange is negatively related to 3PL providers'
opportunism.
The exibility of relational norms is manifest in the good-faith
modications and adjustments that partners make in response to
environmental events and unanticipated contingencies (Dwyer
et al., 1987; Thompson, 1967). Flexibility helps both partners to be
willing to change their behavior based on the available alternatives
(Martin and Rubin, 1995), and is implemented through cultural
initiation or socialization processes rather than formally designed
mechanisms (Grifth and Myers, 2005; Heide, 1994). According to
SET, exchange relationships can be organized and managed
through cooperative relational processes that rely on norm-based
mechanisms of governance (Macneil, 1978; Nevin, 1995). As a bilateral form of governance, these relational processes comprise
highly collaborative responses to each partner's needs and requests to exibly adjust their practices (Bello and Gilliland, 1997;

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B. Huo et al. / Int. J. Production Economics 182 (2016) 293303

Heide, 1994). In a bilateral system, the long-term benets of the

system serve as a restraint on individual tendencies, and individual goals are reached through joint accomplishments (Heide,
1994). Therefore, the trading parties in the exchange relationship
are restrained from opportunistically pursuing their self-interests
(Ellickson, 1987; Ouchi, 1979). Moreover, if one trading party
adapts to unforeseeable events smoothly and exibly (Poppo and
Zenger, 2002), it will improve the operational routines of the other
partner, and in return the partner will be less likely to behave
opportunistically.
Flexibility is particularly important in highly volatile environments (Aulakh et al., 1996; Zhang et al., 2003), especially in regard
to outsourcing relationships (Barthlemy and Qulin, 2006), because China's 3PL outsourcing environment is marked by a high
degree of uncertainty (Lai et al., 2012). As a factor that differentiates companies from their competitors in the competitive logistics industry (Hartmann and de Grahl, 2011), exibility provides
strategic elasticity and organizational agility, and hence is helpful
for dealing with changing environments. A high degree of exibility enables partners to adapt to the changing environment (Liu
et al., 2009) and alleviates the inuence of environmental uncertainties on opportunism. Therefore, we hypothesize:
H2b. Flexibility
opportunism.

is

negatively

related

to

3PL

providers'

The solidarity of relational norms goes beyond prescribed behavior and creates close ties and a shared identity among interrm exchange partners (Lai et al., 2012). As a dimension of relational norms, solidarity contributes to relational governance,
which acts as an alternative to centralized control by promoting a
bilateral structure and equitable process (Zhou and Xu, 2012).
Solidarity helps to shift the transactions between companies towards cooperation within a larger system, and shift the focus from
self-centered behavior and interests to the interests and objectives
of the overall system (Liu et al., 2009; Rokkan et al., 2003). In
addition, solidarity affects the manner in which the parties view
each other and their selection of appropriate actions (Rokkan et al.,
2003). The emphasis on unity leads each party to view the other as
on its own side, and to take actions to maintain a long-term and
stable cooperative relationship. This cooperative behavior reduces
opportunistic behavior, especially in a collectivist, long-term oriented culture such as that in China. Hence, solidarity is critical for
hindering opportunistic behavior and maintaining logistics outsourcing relationships. Therefore, we hypothesize:
H2c. Solidarity
opportunism.

is

negatively

related

to

3PL

providers'

2.2. Relational norms and contracts

Information exchange encourages communication and interactions among exchange partners (Antia and Frazier, 2001; Jap and
Ganesan, 2000), which lead to detailed contracts and their application. The exchange of information also indicates that both parties are willing to voluntarily and proactively provide information
needed by other party (Grifth and Myers, 2005; Heide and John,
1992). Such activities are repeatedly observed in transactions
based on the rules of reciprocity (Cropanzano and Mitchell, 2005).
The frequent voluntary exchange of information helps the partners
to share company-wide goals and have a better understanding of
each other's behavior (Barthlemy and Qulin, 2006). As a result,
information asymmetry is reduced during the contract design and
contract application periods. When 3PL providers and users
communicate extensively and have a better understanding of their
partners' needs, requirements, roles, and responsibilities when
designing a contract, they can specify the contract terms relating

to the transaction in greater detail (Poppo and Zenger, 2002; Zhou

and Xu, 2012). Furthermore, if the members are able to thoroughly
discuss the outcomes, key performance indicators, methods for
performing actions, and solutions to solving problems related to
unforeseen contingencies, they can reduce the information and
contracting costs (Baumol and Williamson, 1985). Finally, if sufcient information is shared during the transaction, it will be easier
for 3PL users and providers to monitor each other's behavior and
examine the service quality. Therefore, we hypothesize:
H3a. Information exchange is positively related to detailed
contracts.
H3b. Information exchange is positively related to contract
application.
Establishing and preserving a relationship is not free (Lai et al.,
2012; Luo, 2006). Transaction-specic investments are needed in a
relationship, such as time and people. Because these investments
cannot be used in other transactions, it is vital to make good use of
the investments. Flexibility can lead to strategically elastic and
organizationally agile social environments in which the partners
thoughts and behavior can be adjusted and modied according to
the conditions (Macneil, 1978). Goal disparities and resource
mismatches are evident in emerging markets, which can result in
opportunism (Luo, 2006). Flexibility can provide a higher likelihood of alternative choices for partners during the contract design process. Moreover, exibility makes it easier to reach an
agreement and thus can reduce negotiation costs. During the
contract application process, exibility is necessary for outsourcing because it not only enhances both partners abilities to
deal with unexpected events and uncertain situations, especially
in market such as China (Luo, 2007b), but also guarantees the
contract application to a certain extent. In emerging markets like
China, where it is impossible to reasonably predict all contingencies because of the drastically changing market and institutional environments, exibility serves to complement the
limited contracts when the transaction is underway. Therefore, we
hypothesize:
H3c. Flexibility is positively related to detailed contracts.
H3d. Flexibility is positively related to contract application.
Solidarity encourages cooperative interactions (Dwyer et al.,
1987; Jap and Ganesan, 2000), fosters a shared identity between
both parties (Macneil, 1980; Takahashi, 2000), and enhances trust,
reliance, and a sense of identity in the relationship (Aulakh et al.,
1996). Thus, solidarity encourages both parties to have similar
long-term cooperative objectives, treat each other in a friendly
manner, avoid behavior that may damage the relationship, and
solve problems with mutual understanding and accommodation.
However, solidarity may reduce the use of contracts (Robinson,
1996). When 3PL providers and users sign a contract, they respectively believe that the other partner will undertake the obligations on their own initiative, offer high-quality services punctually, take actions in favor of both parties interests when facing
expected contingencies, and make efforts to maintain a stable and
sustainable cooperative relationship. Therefore, solidarity leads
the partners to believe that there is no need to make detailed
contracts to restrain their behavior. In a similar way, 3PL users
with solidarity believe that their providers will not break the
contract during the process of exchange; even if a provider makes
a mistake, it will have been made unintentionally and the provider
will actively take steps to correct it. Thus, there is also no need for
users to check and evaluate the performance of 3PL providers and
punish them for violating the contractual terms. Similarly, contracts may be important only during the early stages of an

B. Huo et al. / Int. J. Production Economics 182 (2016) 293303

Information
exchange

H3a, b
H3c, d

Flexibility

H3e, f

Detailed
contract
Contract
application
Contract

Solidarity

H1a, b

Relational
norms

H2a, b, c

Opportunism

Fig. 2. Proposed model.

exchange and have decreasing importance thereafter as a result of

the growing solidarity. Recently, studies have argued that members are becoming more receptive to contracts and regard contracts as frameworks for further cooperation and adaptation (Zhou
and Poppo, 2010; Zhou and Xu, 2012). However, we hypothesize:
H3e. Solidarity is negatively related to detailed contracts.
H3f. Solidarity is negatively related to contract application.
An overview of proposed hypotheses is provided in Fig. 2.

3. Research methodology
3.1. Sampling and data collection
The data used in this study were collected using a mail survey
in China. All samples were listed in the Catalogue of Firms in the
Bohai Rim Region, which is an inuential industrial base characterized by convenient trafc, abundant natural resources, and
advanced technologies. The data were mainly collected from
companies in Tianjin, which is the core industrial city in the Bohai
Rim Region and is representative of China as a whole (Zhao et al.,
2006). Some other cities in the Bohai Rim Region, which are also
major industrial areas, were selected for our sampling, such as
Beijing, Langfang, Baoding, and Tangshan.
The research subject was the relationship between companies
that were using 3PL services. To obtain a representative sample,
we randomly selected companies listed under the manufacturing
and service sections of the Firm Catalogue. We then contacted the
selected companies by telephone to ascertain whether they had
outsourced their logistics activities to 3PL providers. Only companies that had outsourced logistics activities to their 3PL providers were retained in the sampling list. During the telephone calls,
we also obtained the names and addresses of potential respondents and their agreement to participate in the survey. We
targeted only senior logistics managers and other senior or executive-level managers that were directly in charge of logistics
operations as our key informants.

297

We mailed the questionnaires to the prospective respondents,

along with a cover letter highlighting the objectives and potential
contributions of the survey. Follow-up telephone calls and mail
were used to improve the response rate. A self-addressed, stamped
envelope was included to facilitate the return of the completed
questionnaire. Of the approximately 1000 questionnaires that
were sent out, 295 questionnaires were returned. After eliminating
responses with a substantial number of missing values and/or
inconsistencies, we obtained 247 usable samples, resulting in a
response rate of 24.7%.
3.2. Questionnaire design
We undertook an intensive study of the literature to identify
the extant measures for the related constructs. The measures for
contracts were adapted from Wuyts and Geyskens (2005). The
measures for relational norms were adapted from Grifth and
Myers (2005), and the measures for opportunism were adapted
from Wuyts and Geyskens (2005) and Achrol and Gundlach
(1999). The respondents were asked to indicate the extent of their
agreement with statements concerning opportunism, contracts,
and relational norms, using a Likert scale where 1 indicated
strongly disagree and 7 indicated strongly agree.
We tested for nonresponse bias according to the approach of
Armstrong and Overton (1977). The sample was divided into two
parts containing the same number of elements, and a t-test was
then used to compare the two parts. We found no signicant
difference between the two parts had. Hence, nonresponse bias
did not exist. Because we used single informants to answer all of
the questions, we checked for common method bias. The items
comprising the relational norms, contracts, and opportunism
scales were not highly similar in content, and the respondents
were familiar with them. A Harman's one-factor test of common
method bias found several distinct factors and the rst did not
explain the majority of the total variance, revealing that common
method variance bias was not a problem (Hochwarter et al., 2004;
Podsakoff et al., 2003; Podsakoff and Organ, 1986).

4. Analyses and results

4.1. Respondent proles
Proles of the responding companies are provided in
Tables 1 and 2. Nearly all of the companies had engaged in 3PL
outsourcing for more than three years. Table 1 shows that about
80% of the companies belonged to the manufacturing industry, half
of the companies were privately-owned, and about one-fourth
were big companies. Thus, the sample can provide insights for
China's logistics industry.
4.2. Measurement development
The instrument was developed and validated using rigorous
methods based on previous empirical studies (Chen and Paulraj,
2004; Garver and Mentzer, 1999; Min and Mentzer, 2004; Zhao

Table 1
Prole of responding companies.
Industry

Percent (%)

Firm size

Percent (%)

Ownership

Percent (%)

Manufacturing
Retail
Others

79.2%
12.5
8.3

o 100
100499
500999
10004999
45000

36.2%
26.2
13.3
17.2
7.1

State/collectively owned
Private
Joint-ventures
Foreign-owned
Others

30.9
48.3
7.5
10.8
2.5

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B. Huo et al. / Int. J. Production Economics 182 (2016) 293303

Table 2
Company proles.

Table 3
Factor analysis of contracts.

Manufacturing industry

Number

Percentage

Factor loadings

Petroleum/chemicals
Metal ware/general/special equipment
Food/beverage/wine-making/cigarettes
Mechanical manufacturing
Electric apparatus/equipment manufacturers
Textiles/apparel/leather
Transportation equipment
Metallurgy
Electronics
Print/publishing
Rubber/plastics
Materials
Pharmacy/healthcare
Others
Total

26
24
23
22
19
16
16
11
9
7
5
4
2
13
197

13.2%
12.2
11.6
11.2
9.6
8.1
8.1
5.6
4.6
3.6
2.5
2.0
1.0
6.6
100

Detailed contracts

Contract application

0.871
0.887
0.871
0.837
0.569
0.446
0.072
3.534
77.445%

0.266
0.254
0.266
0.177
0.598
0.702
0.895
1.888

DC1
DC2
DC3
DC4
CA1
CA2
CA3
Eigenvalue
Total variance explained

Table 4
Factor analysis for relational norms and opportunism.
Factor loadings

et al., 2008). The questionnaire was developed based on a review

of the extant literature. We developed new items for constructs
that had no available measures based on our understanding and
observations of company practices. The questionnaire was written
in English, translated into Chinese by a researcher, and then backtranslated into English by a different researcher. The back translation was checked for accuracy against the original English version. To ensure the respondents clearly understood the questionnaire, we interviewed some experienced managers, and made
revisions where needed.
The items for opportunism were adapted from Liu et al. (2009)
and Wuyts and Geyskens (2005). The items for detailed contracts
were adapted form Wuyts and Geyskens (2005), and the items for
contract application were adapted form Antia and Frazier (2001)
and Jiang et al. (2013). The measures for relational norms were
mainly adapted from Grifth and Myers (2005). After collecting
the data, we performed a series of analyses to test the reliability
and validity of the constructs.
4.2.1. Unidimensionality and reliability
A strict process was used for the scale development, particularly because the scales were being used in a very different cultural
context than the Western culture in which they were developed.
We followed the two-step method to test construct reliability
(Narasimhan and Jayaram, 1998). First, we conducted exploratory
factor analysis (EFA) to ensure the unidimensionality of the scales.
We then used Cronbach's alpha to assess reliability. EFA was used
with principal components analysis for data reduction and to determine the main constructs measured by the items. Varimax rotation with Kaiser normalization was used to clarify the factors
(Zhao et al., 2008). Some measurement items were dropped if the
loadings on the constructs they intended to measure were lower
than those on other constructs. Cronbach's alpha was computed
for each construct to test for internal consistency. Based on the
intercorrelation matrix, items with a correlation value below the
0.30 cutoff were discarded (Flynn et al., 1994; Zhao et al., 2008).
The results of the EFA are shown in Tables 3 and 4. All of the
measurement items had stronger loadings on the construct that
they were supposed to measure and lower loadings on the constructs that they were not supposed to measure, thereby indicating unidimensionality. All of the Cronbach's alpha values were
above the 0.70 cutoff value (Table 5). Therefore, reliability was
ensured in this study.

Opportunism Information
exchange
OP1
OP2
OP3
OP4
OP5
IX1
IX2
IX3
FL1
FL2
FL3
FL4
SO1
SO2
SO3
Eigenvalue
Total variance
explained

0.898
0.891
0.916
0.874
0.839
 0.159
 0.066
 0.042
 0.087
 0.157
 0.067
 0.083
 0.146
 0.128
 0.214
4.063
77.084%

 0.028
 0.059
 0.082
 0.108
 0.082
0.693
0.778
0.781
0.220
0.290
0.163
0.226
0.196
0.281
0.146
2.075

Flexibility Solidarity

 0.126
 0.107
 0.136
 0.085
0.032
0.254
0.218
0.300
0.750
0.783
0.797
0.734
0.404
0.329
0375
3.017

 0.088
 0.067
 0.050
 0.135
 0.174
0.452
0.324
0.018
0.247
0.238
0.242
0.392
0.744
0.768
0.749
2.407

Table 5
Reliability analysis.
Construct

No. of items

Cronbach's alpha

Composite reliability

Information exchange
Flexibility
Solidarity
Detailed contracts
Contract application
Opportunism

3
4
3
4
3
5

0.796
0.876
0.869
0.927
0.762
0.937

0.810
0.877
0.869
0.927
0.771
0.941

linked to its corresponding construct, with the construct covariance freely estimated. The model t indices were chisquare 339.32 with d.f. 194, RMSEA 0.054, NNFI 0.98,
CFI0.98, and standardized RMR 0.037, indicating that the
model had acceptable (Hu et al., 1992). Furthermore, all of the
factor loadings were greater than 0.50 and all of the t-values were
greater than 2.0 (Chau, 1997; Fornell and Larcker, 1981), therefore
convergent validity was demonstrated. To assess the discriminant
validity, we examined the square roots of the average variance
extracted (AVE) and the correlations among the constructs. Table 6
shows that the square roots of the AVE are greater than the correlations. Therefore, discriminant validity is ensured.
4.3. Structural equation modeling and competing models

4.2.2. Construct validity

We constructed a CFA model to assess the convergent and divergent validity (OLeary-Kelly and Vokurka, 1998). Each item was

We used structural equation modeling (SEM) to estimate the

relationships between the constructs. A two-step model building

B. Huo et al. / Int. J. Production Economics 182 (2016) 293303

Table 6
Correlational matrix.
Mean S.D.
Information exchange (IX)
Flexibility (FL)
Solidarity (SO)
Detailed contracts
(DC)
Contract application (CA)
Opportunism (OP)

IX

FL

SO

DC

CA

OP

4.39

1.244 .77

4.69
4.64
4.73

1.016
1.133
1.192

62nn
.61nn
.34nn

.80
.72nn
.47nn

.83
.39nn

.87

4.55

1.099 .26nn

.33nn

.31nn

.64nn

3.20

1.319

 .25nn

 .33nn

 .14n .06 .87

 .23nn

299

second model in which all of the dimensions of relational norms

and contracts directly inuenced opportunism. Although the t
indices were acceptable, the inuence of exibility disappeared.
According to the results of our model, exibility enhances both
detailed contracts and the contract application process, but the
effects are not signicantly different. However, detailed contracts
and contract application have opposite effects on opportunism.
After comparing all of the models, we found that the current
model is the most interesting and appropriate.

.73

5. Discussion and managerial implications

Numbers in bold are square root of AVE values.

n

5.1. The effect of contracts on opportunism

po 0.05.
p o0.01.

nn

Detailed
contract

Information
exchange

-0.21

0.62

Opportunism

Flexibility
0.47

-0.38

Solidarity

Contract
application

Relational norms

Contract

0.33

Fig. 3. Structural equation model.

Table 7
Results of hypothesis tests.
Hypothesis

Outcome

H1a: Detailed contracts are negatively related to 3PL providers'

opportunism
H1b: Contract application is negatively related to 3PL providers'
opportunism
H2a: Information exchange is negatively related to 3PL providers'
opportunism
H2b: Flexibility is negatively related to 3PL providers' opportunism
H2c: Solidarity is negatively related to 3PL providers' opportunism
H3a: Information exchange is positively related to detailed
contracts
H3b: Information exchange is positively related to contract
application
H3c: Flexibility is positively related to detailed contracts
H3d: Flexibility is positively related to contract application
H3e: Solidarity is negatively related to detailed contracts
H3f: Solidarity is negatively related to contract application

Supported
Rejected
Rejected
Rejected
Supported
Rejected
Rejected
Supported
Supported
Rejected
Rejected

approach was used, with the measurement model tested prior to

the structural model (Anderson and Gerbing, 1988; Jreskog and
Srbom, 1993). The maximum likelihood estimation (MLE) method
was used because it has desirable asymptotic properties (e.g.,
minimum variance and unbiasedness) and is scale-free. Multivariate normality was conrmed through univariate QQ plots
(Raykov and Marcoulides, 2012). The goodness of t indices were
chi-square454.28 with d.f. 195, RMSEA 0.068, NNFI 0.96,
CFI0.97, and standardized RMR 0.088. Therefore, our model can
be considered to have acceptable t. Fig. 3 shows the structural
equation model with standardized coefcients for paths that were
signicant at the 0.05 signicance level. The results of the hypotheses test are presented in Table 7.
To identify the best model for the relationships between the
constructs, we also examined two competing models. First, we
deleted the direct effect of relational norms on opportunism, and
the new model could not be well accepted because of the relatively higher standardized RMR value (0.12). Then, we tried a

Our ndings reveal that detailed contracts had a strong negative effect on 3PL providers opportunism, supporting H1a, while
contract application had a strong positive effect, not supporting
H1b. It is an interesting phenomenon that companies are willing
to formulate detailed contracts, but do not use the contracts to
solve problems during the transaction process. Output control
works better than process control in diminishing 3PL providers'
opportunism. If 3PL users try to reduce opportunism through the
application of contracts (process control), 3PL providers are more
likely to engage in opportunism. From another point of view, 3PL
providers are less likely to engage in opportunistic behavior if they
prefer detailed contracts, whereas users face a high possibility of
suffering opportunism if they resort to the strict use of contracts.
Detailed contracts formally describe what 3PL users and providers should and should not do. During the contract application
process, the inequality between users and providers becomes
gradually distinct, especially when it comes to the control function
of the contract application in which interactional justice is essential for curbing opportunism (Crosno et al., 2013). As a result,
providers hope to obtain more benets through opportunism.
Furthermore, contracts are not the main method of preventing
opportunistic behavior and maintaining long-term, stable cooperative relationships for logistics exchanges in China. Owing to
the lack of a stable institutional structure for contract enforcement
and the subjection of law enforcement to particularism and personal accommodation in China (Zhou and Poppo, 2010), it is difcult to achieve the desired results using the legal system and
compulsory contracts (Zhou and Poppo, 2010). Due to the prevalence of guanxi and collectivism in China, the application of
contacts, such as to monitor and examine the outcomes of 3PL
providers, has a negative effect on cooperative relationships and
stimulates opportunism (John, 1984; Jones and George, 1998).
5.2. The effect of relational norms on opportunism
Our ndings reveal that information exchange has no signicant effect on opportunism, thereby rejecting H2a, H3a, and
H3b. However, exibility inuences the opportunism of 3PL providers by encouraging more detailed contracts and facilitating
contract application, thereby supporting H3c and H3d, and rejecting H2b. Moreover, solidarity only reduces 3PL providers' opportunism directly, thereby supporting H2c, and rejecting H3e and
H3f.
Information exchange does not inuence 3PL providers' likelihood of engaging in opportunism. There are several potential
reasons for this nding. First, exchanged information can be
classied into information directly related to transactions (e.g.,
information about products and markets) and information indirectly related to transactions (e.g., proprietary information that
can help the partner). When the exchanged information is indirectly related to a transaction, 3PL providers may have more

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B. Huo et al. / Int. J. Production Economics 182 (2016) 293303

opportunities to access not only the needs and requirements of

3PL users but also their limitations and weaknesses. If 3PL users
reveal too many limitations and weaknesses to 3PL providers, they
may be vulnerable to the provider's opportunism (Hamel, 1991;
Khanna et al., 1998). Second, the information exchanged between
3PL providers and users may be false or distorted, which will increase the cost of judging and selecting useful information. This
also creates extra workload for determining a detailed contract
and increases the difculty of controlling and monitoring the application of the contract. Third, information exchange is not only
conducive to the application of a contract, but also improves trust
(Moorman et al., 1993; Morgan and Hunt, 1994), which may make
3PL users reluctant to constrain the behavior of 3PL providers and
manage their cooperative relationship according to the rigid terms
of the contract. Although information exchange has an insignificant effect on opportunism, it does not a have negative inuence.
Flexibility indirectly affects 3PL providers' opportunism. It is
also negatively related to opportunism by increasing the use detailed contracts and positively related to opportunism by promoting contract application. Flexibility provides convenience for
the dominant party when dealing with issues in a transaction.
During the contract design stage, users are in the ascendant and
possess more information. As a result, providers have difculty
behaving opportunistically. Providers and users hope to smoothly
and successfully promote contracts to meet the mutual expectations and maximum interests of both parties, which implies that
both parties are willing to adapt to reasonable changes. During this
period, exibility helps to curb providers' opportunism, thereby
reducing the transaction costs ex ante. However, during the contract application process the providers become dominant and nd
it easier to engage in opportunism because they possess more
information about the transaction and the costs of opportunism
are not high. If the users choose to strictly control the contract
application process, the providers will be more likely to act
opportunistically.
Of the three dimensions of relational norms, solidarity is the
most effective method for curbing 3PL providers' opportunism.
This nding is consistent with China's collectivist, long-term oriented national culture. Collectivism considers a group (e.g. family, tribe, or state) as the primary unit of reality and requires that
individuals sacrice themselves for the alleged interests of the
collective (Realo et al., 2008). In a collectivist culture, individuals
are considered to be embedded in the group and are expected to
pursue the group's interests and goals (Power et al., 2010). The
solidarity between two parties establishes a larger cooperative
system and enables the parties to pursue the system's maximum
total interests. A long-term orientation implies that both parties
are expected to maximize their benets in the long term (Ganesan,
1994). Companies with a long-term orientation focus on achieving
both their current and future outcomes (Ganesan, 1994). Solidarity
encourages companies to abandon their short-term opportunistic
behavior and maintain long-term, stable cooperative relationships
to pursue the collective long-term goals and interests.
Solidarity was not signicantly related to detailed contracts or
the contract application process. Although solidarity helps parties
pursue the group's interest, the solidarity is challenged when the
parties face events that concern their individual interests. Thus,
the partners need formal, legal, and tangible contracts, which are
becoming more widely accepted by Chinese companies as a means
of constraining partners' opportunistic behavior, regardless of
whether they have solidarity. However, the guanxi system continues to act as a deterrent against opportunism instead of using
the law to enforce contracts (Zhou et al., 2008).

5.3. Managerial implications

The ndings from this study provide some guidelines to help
managers curb opportunism. Relational norms and contracts are
effective governance mechanisms for hindering 3PL providers'
opportunism in the logistics outsourcing industry. Managers
should pay attention to these factors because the different dimensions perform various functions.
First, detailed contracts and the contract application process
have distinct effects on 3PL providers' opportunism. Although
detailed contracts reduce opportunism, the application of the
contract increases opportunism. This means that 3PL users should
propose detailed and accurate objectives during the early stage of
the transaction process. During the contract application process,
more freedom should be offered for providers to fulll their own
duties. Users' that overly interfere with the logistics service provision may increase the providers' costs and make them feel
mistrusted, thereby resulting in opportunism. It may be better to
use soft and moderate means (e.g., relational norms and organizational culture) to govern the transactional relationship instead of
imposing rigid methods once the transaction is underway.
Second, although exibility does not directly reduce 3PL providers' opportunism, 3PL users and providers should create a
exible cooperative environment. During the process of preparing
a detailed contract, the users are usually the dominant party and
their exibility can smooth the negotiation, thereby reducing
costs. Moreover, preparing contracts in a exible cooperative environment helps to hinder 3PL providers' opportunism. However,
3PL users should limit their exibility in the contract application
process to diminish providers opportunism because the providers
are dominant during this period.
Third, resources should be devoted to creating solidarity, which
is the only dimension of relational norms that can directly reduce
3PL providers' opportunism. In China's unique collectivist culture,
it makes sense to form large cooperative systems, set up common
objectives, focus on the interests of the greater cooperative system,
and foster trust between the parties involved.

6. Conclusions and limitations

This study examines the effect of contracts, as a transactional
mechanism, and relational norms, as a relational mechanism, on
opportunism from the perspectives of TCE and SET. We contribute
to the literature by developing and empirically testing a governance mechanism, namely the opportunism model, based on data
collected from China's logistics outsourcing industry. First, this
study demonstrates the positive effects of detailed contracts on
opportunism, and the negative effects of the contract application
process. We speculate that these results may reect the incomplete legal system in China's emerging logistics outsourcing
industry, and the unique national culture characterized by guanxi
and collectivism. Second, our ndings partially open the black
box of how relational norms inuence opportunism. Solidarity
directly reduces opportunism. Flexibility, which helps the dominant parties, inuences opportunism indirectly through contracts,
and information exchange is not signicantly related to opportunism. Third, this study emphasizes the importance of exibility
because of its dual role in affecting opportunism. Moreover, exibility is the only one of the three dimensions of relational norms
that facilitates the formulation of detailed contracts and the contract application process. Overall, the ndings of this study also
contribute to 3PL relationship governance practices.
Although this study makes a number of signicant contributions to the literature and practice, there are several limitations
that suggest avenues for further research. First, although we

B. Huo et al. / Int. J. Production Economics 182 (2016) 293303

examine the effects of three dimensions of relational norms on

opportunism, future studies can add more details to these dimensions to get a deeper understanding. For example, studies can
examine how the exchange of information and what kinds of information can curb opportunism. Second, the degree of exibility
that enables 3PL users to curb providers' opportunism calls for
further studies using multiple methodologies. Third, we tested the
relationship between relational norms and contracts, whereas Lai
et al. (2012) studied the relationship between relational norms
and trust. Future studies could further explore the relationships
between relational norms, contracts, and trust in the logistics
outsourcing industry. Furthermore, there may be other factors that
will help reveal interesting effects when combined with these
factors. Fourth, because the data were only collected from 3PL
users, it may be better if future studies broadened the research
scope by collecting data from both 3PL providers and users. Finally,
this study only investigated 3PL providers opportunism. To gain a

301

more comprehensive understanding of the logistics outsourcing

relationships, future research should examine the opportunism of
both 3PL providers and users.

Acknowledgments
This research was supported by National Natural Science
Foundation of China (#71525005, #71372058) and Natural Science
Foundation of Zhejiang Province China (#LR13G020001), a major
program grant (71090403/71090400) and a Major International
(Regional) Joint Research Project (71420107024) of the natural
science foundation of china (NSFC). It is also supported by the
Institute of Supply Chain Integration and Service Innovations at
South China University of Technology.

Appendix A. Construct measurement with CFA loadings

Measure

Factor
loading

Tvalue

A.1. Opportunism (adapted from Achrol and Gundlach (1999) and Wuyts and Geyskens (2005))
Please indicate the degree of agreement that you have with each statement about your major 3PL providers opportunism (1 strongly
disagree; 7 strongly agree).
OP1: The major 3PL providers often alter the facts to pass the buck or get extra prot.
0.89
17.60
OP2: The major 3PL often breaks its promises.
0.88
17.30
OP3: The major 3PL often hides important information from us.
0.92
18.80
OP4: The major 3PL takes advantage of contract leaks to expand its interests.
0.86
16.67
OP5: The major 3PL sometimes takes advantage of contingencies to stop us pursuing its responsibilities.
0.79
14.70
A.2. Contracts (adapted from Wuyts and Geyskens (2005))
Please indicate the degree of agreement that you have with each statement about the contracts between your company and your major
3PL providers (1 strongly disagree; 7 strongly agree).
A.2.1. Detailed contracts
DC1: In dealing with the major 3PL providers, our contracts precisely dene the cooperation goals and key per0.89
17.52
formance indicators (KPI) (such as price, delivery, lead-time, and damage rate).
DC2: In dealing with this major 3PL, our contract precisely denes the rights and responsibilities of each party and 0.92
18.67
states legal remedies for failure to perform.
DC3: In dealing with the major 3PL providers, our contracts precisely state how each party is to perform.
0.90
17.93
DC4: In dealing with the major 3PL providers, our contracts precisely state what will happen in the case of events 0.78
14.43
occurring that were not planned.
A.2.2. Contract application
CA1: In the process of cooperation, contracts are identied as the most effective method to control opportunistic 0.83
14.56
behavior of each party.
CA2: We often examine and appraise the major 3PL's conduct (and manifestation) regularly based on the contract in 0.79
13.62
the process of cooperation.
CA3: When the major 3PL providers breach the contract or fall short of expected demand, we punish it un0.54
8.58
hesitatingly based on the contract.
A.3. Relational norms (adapted from Grifth and Myers (2005))
Please indicate the degree of agreement that you have with each statement about relational norms (1 strongly disagree; 7 strongly
agree).
A.3.1. Information exchange
IX1: Exchange of information in the relationship takes place frequently and informally, and not only according to a 0.89
16.34
pre-specied agreement.
IX2: It is expected that the parties will provide proprietary information if it can help the other party.
0.80
14.08
IX3: It is expected that we keep each other informed about events or changes that may affect the other party.
0.59
9.50
A.3.2. Flexibility
FL1: When some unexpected situation arises, both parties are exible in accommodating one another if special
0.75
13.33
problems/needs arise.
FL2: Both parties are exible in response to requests for changes in the relationship.
0.83
15.52
FL3: It is expected that both parties will be open to modifying their agreements if unexpected events occur.
0.78
14.14

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B. Huo et al. / Int. J. Production Economics 182 (2016) 293303

FL4: Both parties are expected to be able to make adjustments in the ongoing relationship to cope with changing
circumstances.
A.3.3. Solidarity
SO1: Problems that arise in the course of this relationship are treated by the parties as joint rather than individual
responsibilities.
SO2: Both parties are committed to improvements that may benet the relationship as a whole, and not only the
individual parties.
SO3: Both parties will not take advantage of a strong bargaining position.

0.84

15.86

0.84

15.60

0.83

15.44

0.82

15.27

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