How distance influences contractual governance in buyer-seller relationships

Abstract

This paper investigates how psychological and geographical distance influence contractual governance in exchange relationships. Drawing on multiple data sources, we find that both psychological distance and geographical distance increases firms' contractual safeguard enforcement, while psychological distance decreases the firms' contractual coordination enforcement. Moreover, the paper discusses the effect of psychological distance and geographical distance on contractual coordination enforcement. Findings suggest that firms should consider the nuanced influences of geographical and psychological distance on contractual safeguards and coordination clauses in governing exchange relationships.

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