DO RELATIONSHIPS MATTER? Assessing the Association Between Relationship Design and Contractor Performance

Abstract

Contracting relationships vary in the extent to which they are complete and involve formal contract specification as well as the extent to which they are based on strong relationships and rely on cooperation and trust. Where a contracting arrangement falls on these two continuums constitutes what this paper refers to as "relationship design" and is likely to impact contractor performance. We use data from a survey of child-care centers and Head Start agencies in Ohio to examine the association between the design of contracting relationships and contractor performance. Contractor performance is assessed in two ways: an objective measure of violations identified by government inspectors and a perceptual self-rated measure of performance reported by the contracted service providers. Measures of relationship design are constructed using multiple survey items and are included in multivariate regression analyses while controlling for a variety of organizational characteristics. Findings suggest that contracts involving stronger relationships are positively associated with child-care center performance, and more complete contracts are negatively associated with performance when performance is measured using contractor self-reports.