Alliance Governance Mechanisms in the Face of Disruption

PurposeAs outsourcing continues to grow, supplier management becomes critical to the success of manufacturing firms. Transaction cost economics (TCE) suggests that firms should choose supplier governance mechanisms to ensure fulfillment of contractual obligations and safeguard against opportunism for their outsourcing activities. Accordingly, the purpose of this paper is to examine how buying organizations govern supplier contracts to improve manufacturing competitiveness and financial performance. The relative effectiveness of two primary governance mechanisms, contractual governance (CG), and relational governance, are examined.Design/methodology/approachExpanding upon previous studies, this study delineates three relational governance mechanisms (negotiation efficiency (NE), problem solving relations, and information sharing (IS)) that are conceptually, statistically and pragmatically different. Based on the TCE literature, a conceptual model is developed to decipher the relationships between pre-contract conditions (supplier asset specificity and environmental uncertainty (EU)), governance mechanisms, performance ambiguity (PA), and performance. Using the data collected from 987 firms, the statistical results present several important findings that would advance current theory and practice in outsourcing.FindingsThe authors find empirical support for the effects of contractual and relational governance in improving manufacturing and financial performance. The governance of supplier contracts clearly facilitates manufacturers’ ability to leverage their resources to improve performance. The relative effectiveness of these two governance mechanisms is related to the levels of EU and supplier asset specificity. Relational governance displays greater influence on performance than CG does. However, CG appears to be complementary to relational governance.Research limitations/implicationsThe interplays between supplier asset specificity and EU should be examined in the future. The relationships among NE, IS, and problem solving should also be examined to facilitate the development of relational governance.Practical implicationsManagers should be aware of the situational performance of governance mechanisms. Moreover, it is important to realize how differently each of the three relational governance mechanisms and CG contribute to performance.Originality/valueThis study extends the academic discussion of supplier governance by investigating the alignment of governance mechanisms (relational governance and CG) with pre-contract conditions to reduce PA and, thereby, enhance manufacturing performance. Under the theoretical framework of TCE, the direct and indirect effects of pre-contract conditions and governance variables are fully examined and discussed. Moreover, relational governance involves multiple mechanisms that are conceptually and pragmatically different, and future studies should not treat it as one single construct.

PurposeThe purpose of this paper is to study the mechanisms governing dynamic changes in relational and contractual governance at different stages of government-funded mega construction projects (MCPs) by studying their different effects on project performance and participants’ opportunism.Design/methodology/approachPartial least squares structural equation modeling was used to test eight hypotheses based on data collected from 147 respondents in different participating organizations in Chinese MCPs.FindingsFirst, contractual governance has a stronger positive impact on project performance than relational governance in the early stage of MCPs, while relational governance exerts more positive effects on project performance than contractual governance in the middle and late stages. Second, opportunism is a mediator variable between governance mechanisms and project performance, and relational governance is more effective than contractual governance in restricting opportunism.Originality/valueIn contrast to a static analysis of project governance mechanisms, this study examines dynamic changes in the governance mechanisms of MCPs in the Chinese context by considering the mediating role of opportunism as well as guanxi as an element of relational governance, thus filling in gaps in the literature on MCP governance and contributing to the development of MCP management theory.

For a long time research on the management of IS outsourcing projects viewed relational and contractual governance as substitutes. However, subsequent studies provided empirical evidence for the complementary view. Recently, some authors supported the notion that relational and contractual governance mechanisms can simultaneously be complements and substitutes. Given these inconsistencies the question arises how contractual and relational governance become substitutes or complements. We investigate whether the relationship between governance mechanisms is the outcome of distinctprocesses of interaction between contractual and relational governance. For that purpose, we conduct an exploratory multiple-case study of five IS outsourcing projects at a leading global bank. We identify three archetypical processes illustrating how the interaction between relational and contractual governance can result in a complementary relationship. In addition, we discover one process explaining their substitution. The results of our study propose a shift in perspective. While former studies focused on explaining whether contractual and relational governance are complements or substitutes, we answer the question how and why they become complements and substitutes. Based on our findings, we give implications for further research.

The effectiveness of relational and contractual governance in new product development collaborations: Evidence from Korea

In recent years scholars have discussed the relationship between contractual and relational governance in information systems (IS) outsourcing. Findings regarding this relationship are still mixed. Some hint at a substitutional relationship, others at a complementary relationship. Moreover novel investigations favor another argument: relational and contractual governance mechanisms can simultaneously be complements and substitutes.If governance mechanisms can be both, substitutes and complements, the question arises whether the relationship between different types of governance mechanisms is the outcome of distinct processes of interaction. To answer this question we conducted an exploratory, multiple-case study of five IS outsourcing projects at a leading global bank. We identified four archetypical interaction processes (archetypes): Three archetypes yield complementary relationships, one yields a substitutional relationship. Based on these findings, we searched for patterns in the occurrence of the archetypes as well as for their underlying reasons.Our analysis revealed three salient patterns in the occurrence of the archetypes, each representing a sequence of archetypes: In the first two patterns sequenced archetypes reinforced each other leading to either a “success” (pattern 1) or “failure path” (pattern 2). Pattern 3 - the “interrupted path” - demonstrates how a success path is broken and turned into a failure path induced by an external stimulating event.Our major contribution is a shift in perspective. We show that the relationship between governance mechanisms is not static but dynamic. Dynamic interactions between governance mechanisms facilitate or corroborate perceived quality of IS outsourcing governance. Our findings pave the way towards a process-theoretic view on IS outsourcing governance.KeywordsRelational GovernanceContractual GovernanceComplementsSubstitutesIS OutsourcingIS Offshoring

Organizational commitment is key to sustainable development and the success of farmer cooperatives. The relationship and effectiveness of contractual and relational governance as important means of managing partnerships remain debatable, and their impact on organizational commitment is unclear, particularly in the context of farmer cooperatives. Based on transaction cost theory and social exchange theory, we investigate how contractual and relational governance affect members’ organizational commitment (MOC) under different market uncertainties. Using survey data of 239 farmer cooperatives in China, we examined the conceptual model utilizing hierarchical regression and bootstrapping techniques. The results showed that both contractual and relational governance have significant positive impacts on members’ continuance and affective commitment, but relational governance exerts more positive effects. Contractual governance can significantly promote relational governance; the two have complementary rather than substitute relationships. Moreover, relational governance mediates the link between contractual governance and members’ continuance/affective commitment, and this mediating role strengthens as market uncertainty increases. This study expands the literature on MOC from the perspective of alliance governance, and has important implications for cooperative governance mechanisms and partnership management.

ABSTRACTThis study investigates the effects of alliance governance including contractual and relational governance on alliance performance. We propose an analytical framework for examining the role of alliance governance on alliance performance with moderating and mediating effects. We obtain 205 survey responses from Korean firms that have experienced technology alliances. Empirical findings show that the relationship between alliance governance and alliance performance is moderated by knowledge acquisition. A contractual governance has a greater influence on explicit knowledge acquisition than tacit knowledge acquisition. On the other hand, relational governance is more closely related to tacit knowledge than to explicit knowledge. The influence of the interaction between relational governance and contractual governance on the performance appears to be negative.

Academics and managers are confronted with reconciling the social and economic aspects of business-to-business exchanges. In a service context, the authors investigate the relative importance of contractual and relational governance on exchange performance and the influence of the boundary spanner on the implementation of these governance mechanisms and on exchange performance. They test a model of the governance of commercial banking exchanges using interview data with both parties to the exchange (the account manager as the bank’s boundary spanner and the business client). Relational governance is the predominant governance mechanism associated with exchange performance. Contractual governance is also positively associated to exchange performance, but to a much lesser extent. The closeness of the account manager to the client company in terms of information gathering is also positively associated to exchange performance. However, this is mediated through both contractual and relational governance mechanisms with relational governance being the stronger mechanism.

The article offers author's insights on the alliance governance and performance in small and medium-sized enterprises (SMEs). It states that throwing some light on the process of alliance governance mechanism selection is the objective of the research by SMEs. It adds the evidence provide by the study on the effect of relational and formal governance on the alliance performance.

PurposeThis study aims to (1) validate the efficacy of contractual and relational governance in enhancing operational performance and (2) explore the influence of product complexity on the effectiveness of these governance mechanisms, thereby determining the optimal approach for varying levels of product complexity.Design/methodology/approachBy utilizing a comprehensive theoretical framework encompassing transaction cost economics, social exchange theory and contingency theory, this research explores the intricate interplay between governance mechanisms, product complexity and operational performance, drawing insights from a dataset comprising 246 responses within Mainland China’s manufacturing sector. To rigorously test the proposed hypotheses, this study employed a hierarchical regression analysis.FindingsThe findings of this study are summarized as follows: (1) while both contractual governance and relational governance have a significant impact on operational performance, relational governance is found to be more effective than contractual governance in enhancing operational performance; and (2) the moderation effect of product complexity is evident, as it weakens the impact of contractual governance while simultaneously enhancing the positive influence of relational governance on operational performance.Originality/valueThe study uncovers a moderation effect of product complexity on the relationship between governance mechanisms and operational performance. This finding adds an original contribution to the literature by highlighting how product complexity can interact with governance strategies, providing practical insights for industries dealing with varying levels of product complexity.

PurposeBusiness ecosystem is described as a web of loose relationships, thereby posing some challenges to coordination. In attempt to ensure coordination in business relationships, scholars have proposed relational and contractual governance mechanisms. Hence, this study aims to examine the effects of governance mechanisms on coordination in the pharmaceutical business ecosystem (BE), with the potential mediating effects of closeness and opportunistic behavior.Design/methodology/approachThe study adopted quantitative approach with cross-sectional survey research design to collect data from the business ecosystem of pharmaceutical company X in Ghana. A structured questionnaire based on a five-point Likert scale was employed to collect data. Analysis was based on 173 institutions (both local and international) selected from pharmaceutical BE. Various validity and reliability checks were conducted before the presentation of the actual analysis, which was conducted using ordinary least squares (OLS) regression in Statistical Product and Service Solutions (SPSS).FindingsThe results of the study revealed that both relational and contractual governance have a direct positive effect on coordination between pharmaceutical BE members and the focal firm. The effect of contractual governance on coordination is however, partially mediated by opportunistic behavior. Finally, closeness also fully mediated the effect of relational governance on coordination.Originality/valueThe study builds on the governance mechanisms in exchange relationship, which was hitherto largely limited to the dyadic and triadic business network, partnerships and strategic alliances studies. The contribution to BE literature provides further understanding into transaction cost economics and relational exchange theory, which was dominantly applied in dyadic relationships ties such as partnerships, alliances and networks.

Existing academic literature has discussed contracts and relational governance as the key mechanisms that help alliance partners address problems of cooperation and coordination. However, when an a...

In previous research, it has been debated whether uncertainty moderates the relationship between asset specificity and governance mechanisms. The relationship between the owner and contractor is a typical interorganizational collaborative relationship, with contractual and relational governance as key mechanisms. Based on transaction cost theory and relational exchange theory, this paper establishes a competitive conceptual model of construction project transaction characteristics on contractual and relational governance to test the moderating role of uncertainty in interorganizational relationships. The questionnaire data were analyzed with partial least-squares structural equation modeling (PLS-SEM) to verify the theoretical hypotheses. This paper finds that there is a significant positive correlation between asset specificity and both contractual governance and relationship governance, with uncertainty as a moderator significantly enhancing the correlation between asset specificity and relational governance. The conclusions of this paper support the predictions of relational exchange theory and transaction cost theory. The findings enhance the understanding of project governance mechanisms and interorganizational collaborative relationships. Faced with high uncertainty, the owner and contractor are advised to adopt relational norms such as trust rather than designing more formal contractual terms to resolve conflicts caused by asset specificity.

PurposeThis study aims to explore how relational and contractual governance affect crowdsourcer satisfaction under boundary conditions, including internal (i.e. task complexity) or external (i.e. environmental complexity) factors.Design/methodology/approachWe empirically validate the hypotheses using survey data collected from 255 crowdsourcers on a leading platform (i.e. Zhubajie.com). Partial least squares technique and hierarchical regression analysis are used to test the research model.FindingsBoth forms of governance mechanisms positively affect crowdsourcer satisfaction. Task complexity negatively moderates the linkage of relational governance and crowdsourcer satisfaction. However, environmental complexity weakens the positive effect of contractual governance but enhances the effect of relational governance on satisfaction.Originality/valueThis study deepens the current understanding of governance mechanism in crowdsourcing by discovering the effectiveness of contractual and relational governance. We also contribute to the governance and crowdsourcing literature by revealing the mechanisms of how governance takes effect under task and environmental complexities.

Small‐ and medium‐sized enterprises (SMEs) establish asymmetric research and development (R&D) alliance with core enterprises to improve innovation efficiency. Unfortunately, the gap in the status and bargaining power between enterprises in such partnerships makes the intellectual property risk situation complicated. While gaining support and assistance from core enterprises, SMEs face the risk of exposing their core knowledge and key resources, which seriously affects the stability of R&D alliance and the sustainability of cooperative innovation. How to protect the intellectual property rights of SMEs in the asymmetric R&D alliance and improve the alliance’s stability is an urgent problem to be solved. Based on the theory of resource dependence and transaction cost, this study uses 260 high‐tech companies participating in the asymmetric R&D alliance as a sample to conduct empirical research from the perspective of SMEs in a weak position. The purpose of this study is to sort out the types of intellectual property risks in the alliance and clarify the relationship between them and the stability of asymmetric R&D alliance. Furthermore, this study examines the moderating effects of contract governance mechanisms and relational contracts to explore effective governance mechanisms at the alliance level. Empirical results show that the intellectual property investment risk and the intellectual property loss risk have a significant negative impact on the stability of asymmetric R&D alliance. The contract governance mechanism negatively moderates the impact of intellectual property investment risk on the stability of the asymmetric R&D alliance. The relationship governance mechanism negatively moderates the impact of intellectual property loss risk on the stability of the asymmetric R&D alliance. The contract and relationship governance mechanism jointly negatively moderate the impact of intellectual property investment risk and loss risk on the stability of the asymmetric R&D alliance.