Psychological Impact of Contract Frames on Specific and Ambiguous Alliance Investments.

Building on Transaction Cost Economics (TCE) research, which has largely focused on contractual safeguards for increasing highly specific investments, our study explores the nuanced effects of contract framing on investment decisions in strategic alliances, particularly considering varying degrees of asset specificity ambiguity. Through three experiments, we demonstrate that prevention contracts, framed to mitigate negative events, boost initial investment in exchanges characterized by both explicit high asset specificity and ambiguous specificity levels. In contrast, promotion contracts, framed to promote positive events, are more effective in supporting ambiguous specific investment, following violations of informal exchange expectations. Together, this study underscores the dynamic nature of contract framing in strategic alliances, contributing to a deeper understanding of how psychological factors intersect with traditional TCE considerations to shape investment behavior. [ABSTRACT FROM AUTHOR]