Specific Asset Investment And Relationship Stability In The Contractual Channel Of Agricultural Products

Despite increasing interest in the interaction behaviors between famers and buyers and their effects on transaction performance, several aspects remain unanswered. First, although some empirical studies in traditional marketing channel have already tested the significant effect of specific asset investment on the interpersonal trust, it is not clear whether this conclusion is suitable for contractual channel of agricultural products. Moreover, although the role of bilateral specific asset investment on interpersonal trust has already been mentioned, the result is still implicit. Second, the study of interpersonal trust in contractual channel of agricultural products is still not clear. Thus this study investigates the effect of farmer’s trust on the relationship stability in the contractual channel of agricultural products. Third, the role of government supporting in contractual channel of agricultural products has been mentioned in case studies, but it is not examined empirically.In this study, we consider government supporting as a moderator and test its effect on relationship stability in the contractual channel of agricultural products. Therefore, this study investigates the effect of the buyers’ specific asset investment on the farmer’s trust, and the effect of farmer’s trust on the relationship stability in the contractual channel of agricultural products.This study proposes five hypotheses about the above research questions. By investigating 217 survey data from farmers’side in farmer-buyer firm relationships, this study tests all hypotheses by multiple regression analysis. The results indicate that all hypotheses are supported. First, based on social exchange theory, we find that the specific investment of buyers have positive effects on farmer’s trust, which will be strengthened by farmer’s specific investment. Second, farmer’s trust can promote relationship stability in the contractual channel of agricultural products. That is, farmer’s trust has positive effect on the farmer’s contractual recurrence, but has the negative effect on the farmer’s contractual violations. Finally, more important, as a moderator, government supporting has double effect on relationship stability in the contractual channel of agricultural products. It can strengthen the positive effects of farmer’s trust on contractual recurrence, but weaken the negative effect of farmer’s trust on contractual violations.This study provides several theoretical implications. First, this study provides empirical evidence for important role of buyers’specific investment on farmer’s trust,which will extend the scope of the effect of specific investment on interpersonal trust in traditional marketing channel. Second, based on the perspective of bilateral specific investment, we investigate the moderator role of farmer’s specific investment on the interpersonal trust, which can deepen our understanding on the effect of bilateral specific investment. Third, this study offset the vacancy of interpersonal trust in the contractual channel of agricultural products, which enriches the literatures of trust and relationship stability in the contractual channel of agricultural products. Finally, this study clears its double moderating effects of government supporting on the relationship stability in the contractual channel of agricultural products.According to the above findings, this study proposes corresponding practical suggestions for buyer firms for better management its transaction relationship with farmers, which are helpful for enhancing the stability of contractual channel of agricultural products. First, buyer firms can enhance farmer’s trust by investing specific assets. Second, when buyer firms do specific investment, they should also encourage the farmers to invest specific assets to strengthen the farmer’s trust. Third, considering the double effects of government supporting, the buyer firms should avoid enhancing the relationship stability in the contractual channel of agricultural products by government supporting blindly, which will enhance farmer’s contractual recurrence, as well as contractual violations.