Why the proposal of a complex contract may harm or foster a partnerʹs trust

Extant literature suggests, but has not tested, explanations as to why the proposal of a complex contract, compared to a simple contract, may harm or foster a new business partnerʹs trust. This paper uses qualitative interviews to confirm four explanations that the literature suggests and to identify an additional explanation that the literature has not considered. Then, the paper presents an experiment with scenarios in three countries to determine whether the explanations (mediators) prove relevant. Each of the explanations proved relevant in at least one of the countries. The findings demonstrate that (1) the mediators this paper tests are useful in explaining the effects of contract complexity on a partnerʹs trust, and they suggest that (2) culture moderates how individuals interpret complex contracts and build trust. For future research, the mediation model this paper proposes provides a basis for detailed tests of relevant moderators.