Opportunism in Inter-firm Exchanges in Emerging Markets[1]

Yadong Luo

Management and Organization Review, 2006, vol. 2, issue 1, 121-147

Abstract: This article develops a theoretical model of opportunism in inter-organizational exchanges in emerging markets. I decompose opportunism into ‘strong form’ (contractual norm violation) and ‘weak form’ (relational norm violation), and suggest that strong form tends to be more observable, measurable and remediable than weak form and its adverse effect on cooperation tends to be stronger but less enduring than weak form. I address how external uncertainty, a multidimensional concept that includes market volatility, legal unprotectability, information unverifiability and regulatory variability, along with internal uncertainty that reflects dyadic tensions such as goal disparity, resource misfit, cultural dissimilarity and bargaining asymmetry, together affect exchange members' opportunism. This is followed by further discussions on conditions under which firms will opt for strong form or weak form opportunism in the face of such external and internal uncertainties. I suggest that suppressing forces against opportunism necessitates not only economic ordering, such as contractual mechanisms and structural mechanisms, but also social ordering, such as relational mechanisms and justice mechanisms. I expect that economic ordering is more effective in resisting strong form opportunism while social ordering is more forceful in curtailing weak form opportunism.

Date: 2006
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