Influence of Prior Ties on Trust in Contract Enforcement in the Construction Industry: Moderating Role of the Shadow of the Future

Abstract

This article explores the effect of prior ties on trust in contract enforcement after contractual breaches, which is underdeveloped in the existing literature, from a multifunctional perspective. In this research, both goodwill-based and competence-based trust have been distinguished to explore their mediating effects on the influence of prior ties on contract enforcement; two diverse functions of contracts, controlling and coordination, have been differentiated. This study also examined the moderating effects of the shadow of the future on these functions. Using data gathered from a paper-based survey of 195 Chinese general parties in the construction industry, we posit that prior ties between contracting parties will improve the level of both goodwill-based and competence-based trust between them, thus negatively influencing the severity of contract enforcement. Furthermore, the inhibiting effects of competence-based trust on the severity of coordination contract enforcement will be strengthened under the circumstances of a higher likelihood of continued cooperation. This study offers a deep and nuanced understanding of contract enforcement.