Governance Mechanisms of Opportunism: Integrating from Transaction Cost Analysis and Relational Exchange Theory

Abstract

This study explores, from the perspectives of transaction cost analysis and relational exchange theory, the governance mechanisms that a manufacturer uses to manage a supplier's opportunism. Through this study, how the manufacturer can employ the mechanisms of selection, asset specificity, and relational norms respectively and simultaneously to mitigate the supplier's opportunism is understood. The results indicate that the manufacturer can employ the aforementioned mechanisms respectively to reduce the supplier's opportunism. When high relational norms exist between exchange partners, from the perspective of relational exchange theory, the moderate selection and asset specificity the manufacturer implements are best to restrain the supplier's opportunism.