Ambiguous Adaptation: The Effect of Contract Duration and Investments in Relational Mechanisms on Premature Relationship Termination

We investigate the connection between contract duration, relational mechanisms, and premature relationship termination. Based on an analysis of a large sample of exchange relationships in the global service-provider industry, we argue that investments in either longer contract duration or more intense relational mechanisms provide an effective means for contingency adaptation and therefore reduce the probability of premature termination. However, in situations where relationships are already governed by longer duration contracts, we argue that investments in relational mechanism create ambiguous reference points for adaption and thus increase the likelihood of premature termination by restricting the parties' set of adaptive actions.