When does justice drive alliance success? Direct and moderating effects based on transaction cost theory

Abstract

Although the role of justice has long been documented in organizational contexts, little is known about the relative effects of distinct types of justice in inter-organizational relationships. Building on transaction cost theory (TCT), our research investigates how procedural justice and distributive justice affect alliance success differentially and under what conditions these effects are amplified or weakened. Results derived from a sample of 410 Chinese alliance firms involving two key informants per firm suggest that procedural justice has a greater influence on alliance success than distributive justice and that such a comparative effect varies across types of trust and conflict. Specifically, when alliance firms share a high level of goodwill trust or constructive conflict, they rely to a greater extent on procedural justice than on distributive justice to achieve alliance success. In contrast, when there is a high level of constructive conflict, alliance firms depend more heavily on distributive justice than on procedural justice to achieve success. Our study extends TCT to explain how, in the context of Chinese culture, firms employ appropriate tools of justice in ongoing alliances.