The Role of Contract Framing in the Emergence of Trust : Evidence from Franchise Contract Experiment

Contracts and trust are both seen as important aspects of successful collaboration between trading partners. However, the interplay between these two dimensions remains poorly understood. In this paper, we draw upon a framing-based perspective to study the influence of the nature of the contractual design on the level of trust. We suggest that the type of contract framing plays a key role in shaping the development of trust. Our empirical analysis uses a quasi-experiment to compare promotion-framed versus prevention-framed franchise contracts. Consistent with our hypotheses, our results indicate that promotion-framed contracts influence more positively trust than prevention-based contracts. We also find that perceived contract completeness and perceived control of the franchisor have different effects on trust according to the type of contract framing. We point out the importance of our study for the contract-trust relationship debate and discuss its implications for the contract design literature