The Microfoundations of Relational Governance Capability: A Social Capital Perspective

Abstract

Organizations adopt a variety of governance mechanisms to drive collaboration in organizational and inter-organizational relationships. Scholars have examined structural and processual dimensions of inter-organizational governance. Adopting a microfoundational approach, we explore how the interactions between individuals, processes, and structures influence the development of an organization’s capability to govern its relationships through relational governance mechanisms. We conducted a longitudinal case study with a multinational bank to examine the development of inter-organizational governance capability through a social capital theoretic lens. We find that the capability is developed by reconciling individual-level factors through complex social processes, leading to the development of inter-organizational structures. These structures contribute to the development of structural, cognitive, and relational social capital. Finally, these processes differ depending on the complexity of the task. We present a framework to deepen our understanding of the development of relational governance capability.