Skip to main content

Complementarity Between Formal and Relational Governance Mechanisms in Inter-organizational Networks: Combining Resource-Based and Relational Governance Perspectives

  • Chapter
  • First Online:
Interfirm Networks

Abstract

Previous research has mainly focused on the transaction cost view of governance which argues that formal and relational governance mechanisms in interorganizational networks are substitutes. This study extends the work on formal and relational governance in network relationships by developing an integrative framework based on resource-based and relational governance perspectives in order to explain the complementary relationship between formal and relational governance mechanisms. The resource-based and relational governance views argue that formal and relational governance mechanisms function as complements for knowledge creation, knowledge integration and communication in explaining relational outcome. The results from 104 suppliers in the Turkish automotive industry support the complement perspective.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

eBook
USD 16.99
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 109.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info
Hardcover Book
USD 109.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

References

  • Arranz N, de Fdez. Arroyabe JC (2012) Effect of formal contract, relational norms and trust on performance of joint research and development projects. Br J Manage 23:575–588

    Article  Google Scholar 

  • Asanuma B (1989) Manufacturer-supplier relationships in Japan and the concept of relation-specific skill. J Jpn Int Econ 3:1–30

    Article  Google Scholar 

  • Bensaou M, Anderson E (1999) Buyer-supplier relations in industrial markets: when do buyers risk making idiosyncratic investments? Organ Sci 10:460–481

    Article  Google Scholar 

  • Bensaou M, Venkatraman N (1995) Configurations of interorganizational relationships: a comparison between U.S. and Japanese. Manage Sci 41:1471–1492

    Article  Google Scholar 

  • Brown JR, Dev CS, Lee DJ (2000) Managing marketing channel opportunism: the efficacy of alternative governance mechanisms. J Market 64:51–65

    Article  Google Scholar 

  • Buvik A, Reve T (2002) Inter-firm governance and structural power in industrial relationships: the moderating effect of bargaining power on the contractual safeguarding of specific assets. Scand J Manage 18:261–284

    Article  Google Scholar 

  • Cai S, Yang Z (2011) Development of cooperative norms in buyer-supplier relationship: the Chinese experience. J Supply Manage 44:55–70

    Article  Google Scholar 

  • Cai S, Yang Z, Jun M (2011) Cooperative norms, structural mechanisms, and supplier performance: empirical evidence from Chinese manufacturers. J Purchasing Supply Manage 17:1–10

    Article  Google Scholar 

  • Caniels MCJ, Gelderman CJ (2010) The safeguarding effect of governance mechanisms in inter-firm exchange: the decisive role of mutual opportunism. Br J Manage 21:239–254

    Article  Google Scholar 

  • Caniels MCJ, Gelderman CJ, Vermeulen NP (2012) The interplay of governance mechanisms in complex procurement projects. J Purchasing Supply Manage 18:113–121

    Article  Google Scholar 

  • Cannon JP, Achrol RS, Gundlach GT (2000) Contracts, norms, and plural form governance. J Acad Market Sci 28:180–194

    Article  Google Scholar 

  • Carson SJ, Madhok A, Wu T (2006) Uncertainty, opportunism, and governance: the effects of volatility and ambiguity on formal and relational contracting. Acad Manage J 49:1058–1077

    Article  Google Scholar 

  • Cavusgil ST, Deligonul S, Zhang C (2004) Curbing foreign distributor opportunism: an examination of trust, contracts, and the legal environment in international channel relationships. J Int Market 12:7–27

    Article  Google Scholar 

  • de Man AP, Roijakkers N (2009) Alliance governance: balancing control and trust in dealing with risk. Long Range Plann 42:75–95

    Article  Google Scholar 

  • Dekker HC (2004) Control of interorganizational relationships: evidence on appropriation concerns and coordination requirements. Account Organ Soc 29:27–49

    Article  Google Scholar 

  • Dyer JH (1997) Effective interim collaboration: how firms minimize transaction costs and maximize transaction value. Strateg Manage J 18:535–556

    Article  Google Scholar 

  • Dyer JH, Singh H (1998) The relational view: cooperative strategy and sources of interorganizational competitive advantage. Acad Manage Rev 23:600–679

    Google Scholar 

  • Dyer JH, Singh H, Kale P (2008) Splitting the pie: rent distribution in alliances and networks. Manage Decis Econ 29:137–148

    Article  Google Scholar 

  • Faems D, Janssens M, Madhok A, Van Looy B (2008) Toward an integrative perspective on alliance governance: connecting contract design, trust dynamics, and contract application. Acad Manage J 51:1053–1078

    Article  Google Scholar 

  • Fredericks E (2005) Cross-functional involvement in new product development: a resource dependency and human capital perspective. Qual Market Res An Int J 8:327–341

    Article  Google Scholar 

  • Galbraith J (1973) Designing complex organizations. Addison-Wesley, Reading, MA

    Google Scholar 

  • Ghoshal S, Moran P (1996) Bad for practice: a critique of the transaction cost theory. Acad Manage Rev 21:13–47

    Google Scholar 

  • Gibson CR, Birkinshaw J (2004) The antecedents, consequences, and mediating role of organizational ambidexterity. Acad Manage J 47:209–226

    Article  Google Scholar 

  • Goo J, Kishore R, Rao HR, Nam K (2009) The role of service level agreements in relational management of information technology outsourcing: an empirical study. MIS Q 33:119–145

    Google Scholar 

  • Gopal A, Koka BR (2012) The asymmetric benefits of relational flexibility: evidence from software development outsourcing. MIS Q 36:553–576

    Google Scholar 

  • Gorovaia N, Windsperger J (2011) Determinants of the knowledge transfer strategy in franchising: integrating knowledge-based and relational governance perspectives. Serv Ind J 11:1–18

    Google Scholar 

  • Granovetter M (1985) Economic action and social structure: the problem of embeddedness. Am J Sociol 91:481–510

    Article  Google Scholar 

  • Gulati R (1995) Does familiarity breed trust? The implications of repeated ties for contractual choice in alliances. Acad Manage J 38:85–112

    Article  Google Scholar 

  • Gulati R, Singh H (1998) The architecture of cooperation: managing coordination costs and appropriation concerns in strategic alliances. Adm Sci Q 43:781–814

    Article  Google Scholar 

  • Gulati R, Sytch M (2007) Dependence asymmetry and joint dependence in interorganizational relationships: effects of embeddedness on a manufacturer’s performance in procurement relationships. Adm Sci Q 52:32–69

    Google Scholar 

  • Gulati R, Lawrence PR, Puranam P (2005) Adaptation vertical relationships: beyond incentive conflict. Strateg Manage J 26:415–440

    Article  Google Scholar 

  • Hair JF, Anderson RE, Tatham RL, Black WC (1998) Multivariate data analysis. Pearson Education, Upper Saddle River, NJ

    Google Scholar 

  • Hansen MH, Hoskisson RE, Barney JB (2008) Competitive advantage in alliance governance: resolving the opportunism minimization - gain maximization paradox. Manage Decis Econ 29:191–208

    Article  Google Scholar 

  • Harman HH (1967) Modern factor analysis, 2nd edn. University of Chicago Press, Chicago

    Google Scholar 

  • Heide JB (2003) Plural governance in industrial purchasing. J Market 67:18–29

    Article  Google Scholar 

  • Heide JB, John G (1990) Alliances in industrial purchasing: the determinants of joint action in buyer-supplier relationships. J Market Res 27:24–36

    Article  Google Scholar 

  • Heide JB, John G (1992) Do Norms Matter in Marketing Relationships? J Market 56:32–44

    Article  Google Scholar 

  • Ivens BS (2004) How relevant are different forms of relational behavior? An empirical test based on Macneil’s exchange framework. J Bus Ind Market 19:300–309

    Article  Google Scholar 

  • Ivens BS (2005) Flexibility in industrial service relationships: the construct, antecedents, and performance outcomes. Ind Market Manage 34:566–576

    Article  Google Scholar 

  • John G (1984) An empirical investigation of some antecedents of opportunism in a marketing channel. J Market Res 21:278–289

    Article  Google Scholar 

  • John G, Weitz B (1988) Forward integration into distribution: an empirical test of transaction cost analysis. J Law Econ Organ 4:337–355

    Google Scholar 

  • Jöreskog KG, Sörbom D (2002) Lisrel 8.53: user’s reference guide. Scientific Software International, Chicago

    Google Scholar 

  • Joshi AW, Stump RL (1999) The contingent effect of specific asset investments on joint action in manufacturer-supplier relationships: an empirical test of the moderating role of reciprocal asset investments, uncertainty, and trust. J Acad Market Sci 27:291–305

    Article  Google Scholar 

  • Kaiser HF (1960) The application of electronic computers to factor analysis. Educ Psychol Meas 20:141–151

    Article  Google Scholar 

  • Kale P, Singh H, Perlmutter H (2000) Learning and protection of proprietary assets in strategic alliances: building relational capital. Strateg Manage J 21:217–237

    Article  Google Scholar 

  • Karimi J, Somers TM, Gupta YP (2004) Impact of environmental uncertainty and task characteristics on user satisfaction with data. Inf Syst Res 15:175–193

    Article  Google Scholar 

  • Kaufmann PJ, Dant R (1992) The dimensions of commercial exchange. Market Lett 3:171–185

    Article  Google Scholar 

  • Kaufmann PJ, Stern LW (1988) Relational exchange norms, perceptions of unfairness, and retained hostility in commercial litigation. J Confl Resolut 32:534–552

    Article  Google Scholar 

  • Kim K (1999) On determinants of joint action in industrial distributor-supplier relationships: beyond economic efficiency. Int J Res Market 16:217–236

    Article  Google Scholar 

  • Kim J (2013) Formal and informal governance in biotechnology alliances: board oversight, contractual control, and repeated deals. Ind Corporate Change. doi:10.1093/icc/dtt045

    Google Scholar 

  • Klein Woolthuis R, Hillebrand B, Nooteboom B (2005) Trust, contract and relationship development. Organ Stud 26:813–840

    Article  Google Scholar 

  • Kline RB (1998) Principle of structural equation modelling. The Guildford Press, New York

    Google Scholar 

  • Lee Y, Cavusgil ST (2006) Enhancing alliance performance: the effects of contractual-based versus relational-based governance. J Bus Res 59:896–905

    Article  Google Scholar 

  • Leiblein MJ (2003) The choice of organizational governance form and performance: predictions from transaction cost, resource-based, and real options theories. J Manage 29:937–961

    Google Scholar 

  • Li JJ, Poppo L, Zhou KZ (2010a) Relational mechanisms, formal contracts, and local knowledge acquisition by international subsidiaries. Strateg Manage J 31:349–370

    Google Scholar 

  • Li Y, Xie E, Teo HH, Peng MW (2010b) Formal control and social control in domestic and international buyer-supplier relationships. J Oper Manage 28:333–344

    Article  Google Scholar 

  • Liu Y, Luo Y, Liu T (2009) Governing buyer-supplier relationships through transactional and relational mechanisms: evidence from China. J Oper Manage 27:294–309

    Article  Google Scholar 

  • Lleras C (2005) Path analysis. Encycl Social Meas 3:25–30

    Article  Google Scholar 

  • Lui SS, Wong Y, Liu W (2009) Asset specificity roles in interfirm cooperation: reducing opportunistic behavior or increasing cooperative behavior? J Bus Res 62:1214–1219

    Article  Google Scholar 

  • Luo Y (2002) Contract, cooperation, and performance in international joint ventures. Strateg Manage J 23:903–919

    Article  Google Scholar 

  • Macaulay S (1963) Non-contractual relations in business: a preliminary study. Am Sociol Rev 28:55–67

    Article  Google Scholar 

  • Macneil IR (1980) The new social contract: an inquiry into modern contractual relations. Yale University Press, London

    Google Scholar 

  • Macneil I (1983) Values in contract, internal and external. Northwestern Univ Law Rev 78:340–418

    Google Scholar 

  • Madhok A (1995) Revisiting multinational firm's tolerance for joint ventures: a trust- based approach. J Int Bus Stud 26:117–137

    Article  Google Scholar 

  • Madhok A, Tallman S (1998) Resources, transactions and rents: managing value through interfirm collaborative relationships. Organ Sci 9:326–339

    Article  Google Scholar 

  • Mahapatra S, Narasimhan R, Barbieri P (2010) Strategic interdependence, governance effectiveness and supplier performance: a dyadic case study investigation and theory development. J Oper Manage 28:537–552

    Article  Google Scholar 

  • Mayer KJ, Salomon RM (2006) Capabilities, contractual hazards, and governance: integrating resource-based and transaction cost perspective. Acad Manage J 49:942–959

    Article  Google Scholar 

  • McIvor R (2009) How the transaction cost and resource-based theories of the firm inform outsourcing evaluation. J Oper Manage 27:45–63

    Article  Google Scholar 

  • Mellewigt T, Madhok A, Weibel A (2007) Trust and formal contracts in interorganizational relationships- substitutes and complements. Manager Decis Econ 28:833–847

    Article  Google Scholar 

  • Noordewier TG, John G, Nevin JR (1990) Performance outcomes of purchasing arrangements in industrial buyer-vendor relationships. J Market 54:80–93

    Article  Google Scholar 

  • Nooteboom B, Berger J, Noorderhaven NG (1997) Effects of trust and governance on relational risk. Acad Manage J 40:308–338

    Article  Google Scholar 

  • North DC (1990) Institutions, institutional change, and economic performance. Norton, New York

    Book  Google Scholar 

  • Paulin M, Ferguson RJ (2010) Relational norms in interfirm exchanges: from transactional cost economics to the service-dominant logic. J Bus Bus Market 17:365–405

    Article  Google Scholar 

  • Peng MW, Wang DYL, Jiang Y (2008) An institution-based view of international business strategy: a focus on emerging economies. J Int Bus Stud 39:920–936

    Article  Google Scholar 

  • Podsakoff PM, Organ DW (1986) Self-reports in organizational research: problems and prospects. J Manage 12:69–82

    Google Scholar 

  • Podsakoff PM, MacKenzie SB, Lee JY, Podsakoff NP (2003) Common method biases in behavioral research: a critical review of the literature and recommended remedies. J Appl Psychol 88:879–903

    Article  Google Scholar 

  • Poppo L, Zenger T (2002) Do formal contracts and relational governance function as substitutes or complements? Strateg Manage J 23:707–725

    Article  Google Scholar 

  • Richardson J (1996) Vertical integration and rapid response in fashion apparel. Organ Sci 7:400–412

    Article  Google Scholar 

  • Rumelt RP (1984) Towards a strategic theory of the firm. In: Lamb R (ed) Competitive Strategy Management. Prentice-Hall, Englewood Cliffs, NJ, pp 131–145

    Google Scholar 

  • Sako M, Helper S (1998) Determinants of trust in supplier relations: evidence from the automotive industry in Japan and the United States. J Econ Behav Organ 34:387–417

    Article  Google Scholar 

  • Sánchez JM, Vélez ML, Álvarez-Dardet C (2012) Evolving functions of interorganizational governance mechanisms. Manager Decis Econ 34:301–318

    Article  Google Scholar 

  • Sawhney Celly K, Spekman RE, Kamauff JW (1999) Technological uncertainty, buyer preferences and supplier assurances: an examination of Pacific Rim purchasing arrangements. J Int Bus Stud 30:297–316

    Article  Google Scholar 

  • TAYSAD (Association of Automotive Parts & Components Manufacturers in Turkey) (2003). TAYSAD brief report, http://www.taysad.org.tr/altmenu.asp?Anald=1050 &def_dil_id=149, accessed on 13 October 2010

  • Thompson JD (1967) Organizations in action. McGraw-Hill, New York

    Google Scholar 

  • Thorgren S, Wincent J (2011) Interorganizational trust: origins, dysfunctions and regulation of rigidities. Br J Manage 22:21–41

    Article  Google Scholar 

  • Uzzi B (1996) The sources and consequences of embeddedness for the Economic performance of organizations: the network effect. Am Sociol Rev 61:674–698

    Article  Google Scholar 

  • Vivek SD, Banwet DK, Shankar R (2008) Analysis of interactions among core, transaction and relationship-specific investments: the case of offshoring. J Oper Manage 26:180–197

    Article  Google Scholar 

  • Wang ETG, Wei HL (2007) Interorganizational governance value creation: coordinating for information visibility and flexibility in supply chains. Decis Sci 38:647–674

    Article  Google Scholar 

  • Wang Q, Bradford K, Xu J, Weitz B (2008) Creativity in buyer-seller relationships: the role of governance. Int J Res Mark 25:109–118

    Article  Google Scholar 

  • Wathne KH, Heide JB (2000) Opportunism in interfirm relationships: forms, outcomes, and solutions. J Market 64:36–51

    Article  Google Scholar 

  • Wathne KH, Heide JB (2004) Relationship governance in a supply chain network. J Market 68:73–89

    Article  Google Scholar 

  • Wincent J, Thorgren S, Anokhin SA (2013) Managing maturing government-supported networks: the shift from monitoring to embeddedness controls. Br J Manage 24:480–497. doi:10.1111/j.1467-8551.2012.00819.x

    Article  Google Scholar 

  • Wu WY, Chang SC, Wu YJ (2006) The impacts of specificity investments on relationship learning and competence building: the supplier’s perspective. Int J Manage Enterp Dev 3:244–263

    Article  Google Scholar 

  • Young G, Sapienza H, Baumer D (2003) The influence of flexibility in buyer-seller relationships on the productivity of knowledge. J Bus Res 56:443–451

    Article  Google Scholar 

  • Young-Ybarra C, Wiersema M (1999) Strategic flexibility in information technology alliances: the influence of transaction cost economics and social exchange theory. Organ Sci 10:439–459

    Article  Google Scholar 

  • Zaheer A, Venkatraman N (1995) Relational governance as an interorganizational strategy: an empirical test of the role of trust in economic exchange. Strateg Manage J 16:373–392

    Article  Google Scholar 

  • Zaheer A, McEvily B, Perrone V (1998) Does trust matter? Exploring the effects of interorganizational and interpersonal trust on performance. Organ Sci 9:141–159

    Article  Google Scholar 

  • Zajac E, Olsen C (1993) From transaction cost to transactional value analysis: implications for the study of interorganizational strategies. J Manage Stud 30:13–145

    Article  Google Scholar 

  • Zhang Q, Zhou KZ (2013) Governing interfirm knowledge transfer in the Chinese market: the interplay of formal and informal mechanisms. Ind Market Manage 42:783–791

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

Authors

Corresponding author

Correspondence to Tugba Gurcaylilar-Yenidogan .

Editor information

Editors and Affiliations

Rights and permissions

Reprints and permissions

Copyright information

© 2015 Springer International Publishing Switzerland

About this chapter

Cite this chapter

Gurcaylilar-Yenidogan, T., Windsperger, J. (2015). Complementarity Between Formal and Relational Governance Mechanisms in Inter-organizational Networks: Combining Resource-Based and Relational Governance Perspectives. In: Windsperger, J., Cliquet, G., Ehrmann, T., Hendrikse, G. (eds) Interfirm Networks. Springer, Cham. https://doi.org/10.1007/978-3-319-10184-2_12

Download citation

Publish with us

Policies and ethics