Abstract
This study compares the effects of governance mechanisms on relationship continuity in the aftermath of exchange interruptions in interfirm relationships. We propose that cooperative relationships can be renewed by matching governance mechanisms (formalization or socialization) to specific types of exchange interruptions (opportunism and misunderstanding). Using data collected from two types of senior managers in 304 buyer firms in China (a total of 608 senior managers), we found that the effects of formalization and socialization on relationship continuity are contingent on exchange interruption type. Socialization is more effective than formalization in renewing relationships when the level of opportunism is high, while formalization works better than socialization when the level of misunderstanding is high. Based on our findings, we encourage firms to diagnose exchange interruption types and then choose a proper governance structure.
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Notes
A buyer’s perspective is used because although buyers and suppliers differ in job functions, “symmetry is expected in the nature and pattern of causation of the behavioral constructs that underlie their relationship” Jap and Anderson (2003, 1686).
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"The work described in this paper was fully sponsored by the Project 71302190, supported by National Natural Science Foundation of China and was fully supported by the Shenzhen Research Institute, City University of Hong Kong."
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Zhang, C., Li, J.J. & Huang, Y. Sustaining relationships after opportunism and misunderstanding: the role of formalization and socialization. Mark Lett 28, 305–319 (2017). https://doi.org/10.1007/s11002-016-9414-1
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DOI: https://doi.org/10.1007/s11002-016-9414-1