The Moderating Effect Of Long-Term Orientation On The Relationship Between Interfirm Power Asymmetry And Interfirm Contracts: The Cases Of Korea And USA

Abstract

The purpose of this study is to enhance our understanding of the effects of LTO culture on the contractual relationship between exchange parties under conditions in which varying levels of asymmetrical power structures exist. This study attempt to determine the validity of projecting conclusions originating from studies conducted in low LTO cultures such as U.S. and Western Europe to contractual relationships in the high LTO cultures of Asia. Therefore, investigations into the influence of LTO may be helpful in understanding contractual relationships formed in countries with differing levels of long-term orientation. Survey research was conducted to collect data from manufacturers, Structural Equation Modeling was used to purify measurement scales, and Multiple Regression was conducted to test the hypotheses. The findings show that LTO companies tend to prefer “soft” contracts, although they enjoy a power advantage over their suppliers; whereas low LTO partners with asymmetrical power advantages prefer “hard” contracts with explicitly detailed written requirements.