The influence of ERP-vendor contract compliance and transaction-specific investment on vendee trust: A signaling theory perspective

Abstract

The successful implementation of Enterprise Resource Planning (ERP) systems is significantly predicated on establishing customer trust, a challenge particularly accentuated in mainland China due to its distinct business and legal environment and a noted high failure rate of ERP projects. Whereas contracts and transaction-specific investments are common strategies to build this trust, their effectiveness remains contested in the existing literature. Specifically, the underlying mechanisms through which detailed contracts influence trust are still not clearly understood. To address these gaps, our study employs signaling theory to conceptualize a model that elucidates how contract completeness, vendor contract compliance, and transaction-specific investment act as trust-building signals in ERP vendor–vendee relationships within the Chinese context. Furthermore, we introduce ownership type as an additional variable, evaluating its influence in shaping customer trust. Our empirical analysis draws on data from 208 Chinese organizations engaged in ERP implementations, revealing nuanced findings. Notably, the vendor’s ownership type, quantified by the degree of foreign ownership, negatively moderates both the results of contract completeness on contract compliance and the subsequent mediation effect on trust, thereby highlighting the critical influence of cultural factors. This study is among the pioneering empirical investigations into the synergistic roles of contract compliance and ownership type in mediating the relationship between contract completeness and trust. Our insights provide a robust foundation for understanding the complexities of contractual and relational governance in ERP vendor–vendee relationships, and we recommend targeted strategies for both vendors and customers to enhance trust in this critical business domain.