1. Do Favour and Face matter in
Collaboration? :
Explicit and Implicit
Contracting
Dr. Wong Y. H.
Department of Management and Marketing,
Hong Kong Polytechnic University

2. Research Objective
1. What are the key antecedents behind de
facto collaborations?
2. Why do coactive dependence, explicit-
implicit controls and face-favour
exchanges with an insider partner affect
the development of insider’s loyalty and
the quality of the de facto relationship?

3. Insider’s Loyalty
• The underlying reason for the success of de facto
collaborations is due to its ability to generate
insider’s loyalty
• Insider’s loyalty refers to the strength of the
relationship between the two collaborating
organisations
• We conceptualize a model of generating insider’s
loyalty through a de facto relationship in the
form of a “Three Cs” framework

4. P6
“Three C” Modelof Insider’s Loyalty
Contracting
ManagementCoactive
Dependence
 Marketing Mix
 Human
Resources
 Logistic
 Capital
Investment
Customization
Exploration
Insider’s
Loyalty
Explicit
Contract
Implicit
Control
Face
Exchange
Favor
Exchange
P4
P2P1
P3
P5
Three “Cs” represent the key elements behind insider’s loyalty

5. Proposition
• P1: Coactive dependence is correlated with explicit &
implicit controls.
• P2: Favour & face exchange is correlated with the
level of insider’s loyalty.
• P3: The level of coactive dependence is correlated
with the use of face & favour exchange.
• P4: Implicit control & explicit contracting is interrelated.
• P5: Explicit & implicit controls improve insider’s loyalty.
• P6: Explicit & implicit controls are correlated with
use of face & favour exchange.

6. Contracting Management
• Explicit Contract
• Classical contract in written or verbal form
• Governs the economic relationship between
organizations
• Less effective in generating loyalty
• Implicit Control
• Adjust the partners’ behavior and explicit contract
• Provide a softer and more flexible framework
• leads to insider’s loyalty between the organizations

7. Customization exploration
Favour exchange
• “Unilateral acts of giving that either reciprocates
previously rendered or are given with expectations
of direct reciprocation” (Blau, 1964).
• Such as gift-giving
• Show respect and consideration and recognize the
status of the other partner
• A process that magnifies commitment and
minimizes defensiveness
• Strong commitment can result in loyalty (Jones,
Taylor & Bansal, 2008)

8. Customization Exploration
Face exchange
• “Face” is perceived as one’s own credibility
• Exchange of partner's respect, status, and moral
reputation as the recognized by other partner
inside a network of supply chain
• Perceived as individual symbolic capital, owing to
the presence of a certain form of power.

9. Results
1. The usage of favour exchange is expected
to result in a long-term relationship
characterized by loyalty.
2. Explicit contracts and implicit controls that
exist between the parties.
The stronger the explicit contract and levels
of collective belief are, the higher the level of
loyalty is.

10. Results
3. Insider’s loyalty is affected by
• Exchange partners’ perception of, or
experience regarding, previous
relationship in terms of relationship
customization, harmony, an financial
benefits
A higher level of relationship quality brings
stronger loyalty.

11. Discussion
• Our results show that an explicit contract ties
suppliers and customers via an agreement
• While implicit control tends to tie both parties
with mutual understanding.
• The explicit contract appears to govern the
economic association while implicit control
provides the norms.
• The results indicate that although implicit
control leads to loyalty, an explicit contract
does not directly do so.

12. Discussion
• An explicit contract appears to have no
significant association with face exchange,
meaning that the relationship can be well
maintained if both parties follow the
contractual agreement.
• However, when the environment is unstable,
the relationship requires flexibility in the form
of implicit control and favour exchange.

13. Implication
• Successful collaboration is pivotal in all industries.
• A specific example: Shipping terminal industry
• Keen global competition demands seamless
collaboration in supply chain processes including
shippers in the upstream and consignees in the
downstream.
• Goal: To meet the needs of various partners with higher
effectiveness and efficiency than other competitors.
• To measure the overall performance of a supply chain,
firms need to incorporate the service effectiveness of
customization exploration in terms of:
• Supply chain’s reliability and flexibility
• Measured by the extent of coactive dependence and favour
exchanges in our.

14. Conclusion
• To provide academics and practitioners with
a new dynamic tool integrated framework in
understanding and implementing effective
insider’s loyalty strategies.
• Yield new insights into de facto collaborative
programs with regard to loyalty-building
process.