Controlling Supplier Opportunism in Industrial Relationships

Abstract

The recent marketing literature reflects a growing interest in relationship management issues. In particular, several recent studies have drawn on transaction cost and agency theory to examine how interfirm relationships are organized. The general premise is that explicit control mechanisms must be deployed in a relationship to manage a partner's potential opportunism. Although previous research has shown that different mechanisms can be used, the tendency has been to examine individual mechanisms in isolation. The authors develop hypotheses about interdependences between different control mechanisms. They also identify some of the contextual factors that influence their use. The framework is tested empirically by examining how chemical manufacturers organize their supplier relationships. The results generally support the hypothesis that firms’ choices among control mechanisms are influenced by contextual factors. Only limited support is found for the hypothesis that interdependencies exist between different mechanisms.