Conflict and Contract Use in Cross-Cultural Buyer-Supplier Relationships

Conflicts are common within global supply chains, especially where the buyer and supplier span different cultures. The use of formal contracts is intended to provide a common language that defines the roles, responsibilities, and liabilities of each party. However, the legitimacy, application, and primacy of contracts are also subject to cultural norms. Our paper explores how buyers and suppliers from different cultural contexts react to different contract functions (control vs. coordination) in the event of conflict. A multi-method research design was adopted. Study 1 involved multiple, in-depth case studies of three Indian suppliers and six of their international buyers. Qualitative findings indicate that in the event of conflict, a buyer’s cultural context influences their choice of contractual control or coordination and that the supplier interprets this choice differently depending on their own culture. A mismatch in cultural contexts between the parties can lead to strong negative emotions and damage to the relationship. We explore supplier reactions further in study 2 through a scenario-based field experiment. Our results showed that the use of contractual control on suppliers from high-context cultures to address conflict has a significant negative, indirect effect on relationship commitment, operating via the emotion of anger.