Regression Analysis

Table 6. The correlation matrices of the variables

Variables 1 2 3 4 5 6 7 8 9

5. Flexibility outside

contract -0.109 0.075 0.508

a. *** Correlation is significant at the 0.01 level (2-tailed).

b. ** Correlation is significant at the 0.05 level (2-tailed).

c. N = 265

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Table 7. Regression analysis of consequences of trust

NOTE:

a. We measured most scales constructs (except “duration of relationship”) on 7-point Likert-type scales (strongly disagree/strongly agree).

b. Figures in ( ) are the standard error of mean.

c. Remark: ***represent P<0.01, ** represent P< 0.05

Based on the same set of data, multiple regression analysis was conducted to identify and quantify precisely which source of trust is influencing the consequences. The

Regression Model Model One Model Two Model Three

Contract Adherence Flexibility beyond

contract Flexibility outside contract

  coefficient P-value coefficient P-value coefficient P-value

Constant 19.527 0.000*** 22.025 0.000*** 19.431 0.000***

Economic-based of

F value 31.258*** 10.344*** 11.010***

R-squared 0.325 0.137 0.145

Adjusted R-squared 0.314 0.124 0.132 

Number of

observation 265 265 265

explanatory variables are the four sources of trust, which are economic-based of trust, process-based of trust, characteristic-based of trust as well as the institutional-based of trust.

On the other hand, the dependent variables are the three consequences of trust such as contract adherence, flexibility beyond contract as well as the flexibility outside contract.

Contract Adherence

From the results shown in table 7, economic (coefficient = 0.263), process (coefficient = 0.369) as well as characteristic-based (coefficient = -0.164) of trust have significant influences on the “Contract Adherence”; however, institutional-based of trust was statistically insignificant to it. 

The negative relation shown by characteristic-based of trust (coefficient -0.164) could be explained on the ground that the closer relationship the lesser dependency on the formal contract. It is because, maybe, the both parties already have built the common goal and good transaction experiences through the long-term relationship as shown by the high the standardized coefficients of process-based trust, which is 0.369. The process-based trust will help promote more efficient and coordination and thus, reduce the suspicion, communication breakdown or strained relationships and leads to faster reduction of uncertainty. Therefore, both partners work best when a climate of trust is developed and less dependent on the formal contract.

Flexibility beyond contract

From the results shown in table 7, only the economic-based of trust has significant influences on the “flexibility beyond contract”, which shown by the high standardized coefficients (beta) of 0.263.

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The process, characteristic and institutional-based of trust was statistically insignificant to it.  This could be explained on the ground that, the Chinese in Malaysia generally are more economic-oriented as they understand that propensity being opportunism might happen anytime, regardless the nationalities or ethnicity, unless hostage relationship is built in the transaction. Hence, while talking about to provide additional flexibility for the formal contract under the uncertainty condition, the Chinese knows it is necessary to seek for the non-legal nature protection at the same time.

The specific assets will be used as an insurance mechanism in the avoidance of opportunistic behavior; especially the business environment and competitive conditions are changing. Both parties in a hostage relationship will show feelings of inability to remove themselves from the relationship due to personal and monetary costs that involved.

Therefore, they believe that actions of partners are good for mutual goal and will not lead to any unfavorable result or action

As a result, they are willing to take actions that might be more risky to show support and trust for partners through giving out the flexibility beyond contract, allowing the partners to make own judgments or adopting civilized contract regulations.

Flexibility outside contract

From the results shown in table 7, only the process-based of trust has significant influences on the “flexibility outside contract”, which shown by the high standardized coefficients (beta) of 0.280.

From the statistic results, the high-standardized coefficients (beta) of process-based of trust suggest that reputation and frequently repeated contact are important in building the extra-ordinary relationship outside contract or relational exchange.

Obviously, the increase of interaction could help to enhance confidence in the trust and commitment for each other that subsequently contributed as advancement to make relationships outside the contract more closed virtually. This kind of way of trust is completely not dependent on the formal rules but emphasized the important of experience.

Thus supports the claim of Macneil (1978, 1980) that relational exchange transpires over time; each transaction must be viewed in terms of the history and its predictable future.

On top of that, the relational exchange participants could expect to gain complex, personal, noneconomic satisfactions etc. One of the features gave by the partner in return in one extra-ordinary relationship or the relationship outside contract is information sharing, resources exchange, honoring to the verbal agreement and the willingness to maintain relationships as well as to sacrifice short-term profit to obtain the long-term benefits. It is not only to satisfy the basic expectation between partners but also to achieve the competition rising on business through the using of immediate, speedy and unified information. To the Chinese, information are highly appreciated and considered as scarce resources. Hence, the ones who are willing to provide “insider” information are the persons who could be trusted.

  On the other hand, the insignificant impact of economic, characteristic and institutional trust suggest that the capability and capital input as well as the institutional constraint will only focus to satisfy the obligated contract in the best way and to conform the benefits for both parties on a the basic requirement.

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