BUILT TO LAST? EXAMINING THE EFFECT OF RELATIONSHIP DURATION ON GOVERNANCE MODE IN BUYER-SUPPLIER RELATIONSHIPS
BUILT TO LAST? EXAMINING THE EFFECT OF RELATIONSHIP DURATION ON GOVERNANCE MODE IN BUYER-SUPPLIER RELATIONSHIPS
by
SANDRIK KOCH
University of Groningen Faculty of Economics and Business
MSc Marketing Management Master thesis
January 2017
Jozef Israëlsstraat 83A 9718 GG Groningen
Tel: (06) 20816476
E-mail: H.A.Koch@student.rug.nl Student number: S2796511
First supervisor: dr. J. (Hans) Berger Second supervisor: dr. J. (Jenny) van Doorn
Preface
As I write this, the final weeks of my study adventure have commenced. It is strange to realize that I started studying nearly 7 years ago! Time truly does fly when having fun. I first went to College and finished my Bachelor of Business Administration. After that I started with the pre-Master Marketing at the University of Groningen and went abroad for an internship in Malaysia. With this Master thesis there comes an end to this period of my life, and I can say with 100% confidence that I am ready to start my career.
I would like to thank a few persons in particular for their support during the writing of my thesis. First of all, I would like to thank my parents for giving me the opportunity to go to College and University in the first place. Although this sometimes felt self-evident, I know that me and all my study friends are very lucky to have had the opportunity to study. I would also like to thank Hans Berger for his support and quick replies to my questions. It has been a pleasant experience to have you as my supervisor.
Furthermore I would like to thank all the great people I met during my study and my travels. They have made these past 7 years truly amazing, and I’m looking even more forward to the years to come.
Thank you!
Abstract
Effective governance of buyer-supplier relationships is essential in order to achieve a
satisfactory and fruitful relationship. But the antecedents of why companies opt for (a) certain (combination of) control mechanisms remain unclear. Previous research has identified some antecedents, mainly based on transaction cost economics, but mixed findings indicate that these drivers are not the only explanatory cause. This study aims to further investigate the drivers and antecedents of the adoption of governance by examining the effect of relationship duration, with environmental dynamism added to the model as a moderating variable. In this paper, we also contribute to the literature regarding the substitutable or complementary nature of formal and social governance. Analyzing a dataset consisting of 166 matched-pair
business-to-business relationships, we found little support for our hypotheses and in some cases intriguing results opposite to our expect relationship direction. Therefore our results mainly add value by showing our research limitations and discussing the implications for future research.
Keywords: social governance, formal governance, buyer-supplier relationship duration, environmental dynamism, relational governance, transaction cost economics, trust.
Table Of Contents
1. Introduction 6
2. Theoretical Framework and Hypotheses 9
2.1 Governance 9
2.1.1 Formal Control Mechanisms 10
2.1.2 Social Control Mechanisms 12
2.2 Formal and Social Control: Substitutes or Complements? 14
2.3 Environmental Dynamism 15
3. Research Design 17
3.1 Data Collection Procedure 17
3.2 Measures 18
3.3 Statistical Procedures 19
3.4 Statistical Analysis and Results 20
4. Discussion & Conclusion 27
5. Limitations & Future Research Implications 31
References 33
Appendices 39
1. Introduction
In recent years, the disintegration of supply chains has increased. As a consequence, the governance mode used to manage the inter-firm ties has gained in significance, and the terms to facilitate the outcomes must be well devised (Ghosh and John, 2005). Effective governance of these relationships implies that managers should find and apply the right (mix of) control mechanism(s) in order to achieve a satisfactory and fruitful relationship (Poppo and Zenger, 2002). One would expect similarly situated firms to use a homogenous mode of governance. But firms situated in a similar position within an industry have been observed to employ heterogeneous governance modes (Ghosh and John, 2005). Previous research has mainly focused on transaction cost economics (TCE) to be the answer to this question (Williamson, 1985; Wuyts and Geyskens, 2005). Mainly because TCE focuses on the make-or-buy decision, crucial for buyer-supplier relationships (Williamson, 2008). Researchers assume that the fundamental driver for firms to adopt a certain (combination of) control mechanism(s) in inter-firm cooperations such as buyer-supplier relationships is minimizing transaction costs (Poppo and Zenger, 2002). This is important, as Dyer and Singh (1998) argue that minimizing transaction costs through effective governance is one of the determinants of relational rents.
Several transaction cost factors, such as behavioral uncertainty, asset specificity and environmental uncertainty have been identified as antecedents of the adoption of (a) certain control mechanism(s) (Beckman et al., 2004; Poppo and Zenger, 2002; Rindfleisch and Heide, 1997). However, the findings resulting from this line of reasoning have been inconsistent. For example, the relationship between environmental dynamism and social control has resulted in contradictory findings, as reported by Joshi and Campbell (2003) and Poppo and Zenger (2002). These inconsistent findings lead scholars to suggest that a focus on TCE as the sole explanatory cause may be too narrow to adequately account for how firms choose formal or social control in inter-firm cooperations (Madhok, 2002). To close this gap, researchers have embarked on a quest to look for additional explanatory evidence. By looking outside the scope of TCE and complement the important previous findings resulting from this
theory on its own, a more holistic view of the antecedents of governance modes in buyer-supplier relationships should emerge.
According to Zhou et al. (2003), three logics underlie the behaviors of firms in economic exchanges: (1) transactions costs, (2) social relations, and (3) institutional constraints. Thus, in addition to TCE, social network theory and institutional view may also provide helpful insights on the adoption of control mechanisms in inter-firm relationships (Lin et al., 2009). Following social network theory, in the context of inter-firm cooperation, social relations between partners may significantly influence the adoption of control mechanisms. Li et al. (2010) argue that these social relations among firms are affected by the length of cooperation and present significant findings on the effect of length of cooperation on governance.
In sum, the general notion that effective cooperation depends upon the adoption of appropriate control mechanisms is widely held (Dyer and Singh, 1998; Wuyts and Geyskens, 2005). Previous research has identified some antecedents (based on TCE), but mixed findings indicate that these drivers are not the only explanatory cause. It is therefore crucial to further investigate the drivers and antecedents of these modes of governance. The following problem statement is central to this study: what effect does the duration of a relationship have on the governance mode in a buyer-supplier relationship?
In order to find the answer to this question, the following research questions have been formulated:
RQ1: What is the effect of buyer-supplier relationship duration on the adoption of social control?
RQ2: What is the effect of buyer-supplier relationship duration on the adoption of formal control?
RQ3: Does environmental dynamism have an effect on the effect of relationship duration on governance mode, and if so in which direction?
RQ4: Do formal and social control act as substitutes or complements?
Following Lin et al. (2009), this research will focus on social network theory and, more specific, on the effect of cooperation duration on the adoption of governance mode. This study thereby provides a continuation of a future research direction as pointed out by Poppo and Zenger (2002), who suggest that the critical role of contracts in a relationship decreases when significant patterns of reputation and cooperative behavior emerge, and provides a continuation of a more recent line of research conducted by for example Li et al. (2010). In addition, previous research has identified environmental dynamism to be an antecedent of the adoption of (a) certain governance mode(s) (Joshi and Campbell, 2003). We therefore include environmental dynamism as a moderator in this study and test the significant previous results of this variable in a new context. Finally, there has been a discussion on whether formal and social control mechanisms are substitutes (Uzzi, 1997; Dyer and Singh, 1998) or complements (Poppo and Zenger, 2002; Currall and Inkpen 2002; Seshadri and Mishra 2004; Wuyts and Geyskens, 2005). These opposite views necessitate further investigation. The literature regarding cooperation duration, control and environmental dynamism in buyer-supplier relationships has yielded interesting but non-conclusive findings, leaving gaps in our understanding of the relationships among the concepts. By linking the three concepts in a theoretical framework, our work will shed new light on how these concepts interact, providing new insights for future research to build upon.
The contribution of this study is threefold. First and foremost, this study builds on the findings of Poppo and Zenger (2002) and explores the avenue of future research as pointed out by these scholars to investigate the effect of duration of a relationship on the adoption of social or formal control, furthering knowledge on the antecedents of governance in buyer-supplier relationships. Secondly, by incorporating environmental dynamism as a moderator in this context, we generate new insights on how this variable affects the choice of governance. Thirdly, we add to the literature regarding social and formal control and the ongoing discussion about whether these modes of governance work in tandem as complements or rather function as substitutes.
This paper is structured as follows. We begin by reviewing the literature, derive corresponding hypotheses and present our conceptual model. Subsequently, a description of
the methodology and the results of our analysis will be presented. We will then conclude with a discussion of the theoretical and future research implications.
2. Theoretical Framework and Hypotheses
2.1 Governance
Governance has been defined by Ghosh and John (2005) as ‘’the explicit and implicit rules of exchange between economic parties’’, such as formal contracts and informal control through relational norms and trust. The objective of such control mechanisms is to administer order in a relationship where common gain and a potential for conflict exist (Williamson, 2002). According to Nooteboom (1999) these risks for conflict are associated with the dependency of firms and the potential for firms to act opportunistically. These relational risks have been characterized by Das and Teng (2001) as the probability and consequences of not having a cooperation that is satisfactory for one or both parties.
Why devote scientific research to investigate firms governance mode(s) of buyer-supplier relationships? Because the adoption of (the right kind of) control mechanisms has been identified to significantly influence the success of buyer-supplier relationships (Fryxell et al., 2002). Moreover, Dyer and Singh (1998) state that effective governance is one of the determinants of relational rents. They propose that effective governance can generate relational rents in two ways: (1) by lowering transaction costs and/or (2) by providing incentives for joint value-creation. Their reasoning for (1) is that more effective governance mechanisms lead to lower transaction costs compared to competitors. Competitors participating in a relationship where more formal/elaborate governance structures (such as contracts) are in place, will experience higher costs due to the more costly writing, monitoring and enforcing procedures accompanying such mechanisms. This results in a competitive advantage for the firm employing more informal control mechanisms (Dyer and Singh, 1998). The reasoning for (2) is that effective governance allows partners to make greater investments in relation-specific assets, because of high levels of safeguarding and relatively low costs as compared to competitors applying more formal safeguards (Dyer and
Singh, 1998).
These control mechanisms can be divided into two main subcategories, namely: formal (which has an economic and legal origin) and informal (which has a social cause, such as relational norms and trust). Formal control mechanisms primarily rely on contracts, whereas social (informal) control relies on social means (Dyer and Singh 1998; Li et al., 2010; Arranz and Arroyabe, 2012). This distinction will now be reviewed in more detail.
2.1.1 Formal Control Mechanisms
Formal control mechanisms rely primarily on contractual agreements. These formal contracts detail the role and responsibilities of the partners and specify what the processes are to resolve problems, as well as penalties for violation of the agreement. They are employed to cultivate cooperation and suppress opportunistic behaviour, The more complex the contract, the greater the specifications of the obligations and processes for dispute resolution. The costs for crafting and enforcing complex contracts is costly and timely, hence parties employ such complex contractual safeguards only when there is a considerable risk and large consequences of a contractual breach. Poppo and Zenger (2002) explain that TCE scholars generally refer to three categories of exchange hazards, which necessitate the employment of (complex) contractual safeguards: asset specificity, uncertainty and measurement difficulty.
Asset Specificity
Asset specificity entails the degree to which relation-specific investments, in human and/or physical assets, is required. A relation-specific investment usually has little or zero value outside of the relationship (Dyer and Singh, 1998). For example, a car manufacturer requires a very specific part for the engine of their new car. In order to make this part, a supplier might decide to build a new series of machinery (physical asset) for the sole purpose of producing the required engine part. The supplier might even train employees (human asset) to work with the new machinery, and build the new plant near the car manufacturer’s factory to reduce transportation costs (site specificity). If the car manufacturer decides to stop the production of these new cars or changes the engine (or threatens to do so to increase their
negotiation position) the aforementioned relation-specific investments become useless. Hence, partners (especially the supplier in this case) need to safeguard against such behavior and promote the longevity of the relationship by employing formal contracts.
Uncertainty
Uncertainty mostly deals with partners having to adapt to problems arising from unforeseeable events. Uncertainty can manifest itself in different ways and has multiple determinants. Behavioral uncertainty for example relates to the unpredictable ways in which actors, such as the exchange partner, could behave. Rapidly changing technology and environmental complexity are other determinants of uncertainty. In this study we will focus on one of the determinants of environmental uncertainty arising from a turbulent industry, which is environmental dynamism (this variable and its expected moderating effect will be explained later on). High uncertainty often imposes greater risk for one or both exchange partners. This might discourage a partner to make specific promises or investments, such as asset specific investments (Poppo and Zenger (2002). Appropriate safeguards, in the form of formal contracts, are needed to reduce risk and encourage partners to make the investments necessary.
Measurement Difficulty
The third exchange hazard has to do with the difficulty in measuring the performance of the exchange partner. Alchian and Demsetz (1972) argue that markets succeed when the link between productivity and reward can be effectively made. That way, markets can pay accordingly for the work that has been done. When performance is hard to measure, parties have an incentive to limit their efforts in fulfilling their promises (a form of opportunistic behavior). For example, a supplier for a food supplement manufacturer might replace one of the ingredients for a cheaper alternative and still charge the same price, since this is hard to measure for the buyer. Managers in this case have two choices, realize lower performance due to the inability to measure performance, or expend resources to improve performance
measurement (Poppo and Zenger, 2002). By expanding contracts and writing additional clauses that facilitate monitoring of a supplier’s behavior, such as obligation to disclose necessary documents or third party monitoring. Thus as measurement becomes more difficult, more complex contracts will be employed (Poppo and Zenger, 2002).
One issue that arises with formal contracts has to do with bounded rationality. According to Williamson (2002) the main lesson from the science of contracts is: ‘’all complex contracts are unavoidably incomplete’’. Since a contractual agreement is written by humans, and humans are unable to foresee every possible situation (because of bounded rationality). Therefore, firms which have adopted a formal mode of governance to manage their inter-firm relationships are often confronted with the need to adapt/rewrite the contractual agreement because of gaps and unforeseen errors. When the costs to write and enforce such contracts become too high, TCE yields that managers may choose to integrate vertically. Another issue is that formal contracts may signal distrust among partners, and by undermining trust, the risk of opportunistic behavior may increase instead of decrease (Fehr and Gachter, 2000).
2.1.2 Social Control Mechanisms
Social relations may significantly impact the adoption of control mechanisms. They shift motivation from short-term gains to long-term economic value (Uzzi, 1997). Social governance emerges from the agreed-upon processes and values in social relationships (Heide and John, 1992). This mode of governance is characterized by social processes that facilitate flexibility, information exchange and solidarity (Poppo and Zenger, 2002). Therefore, problems emerging in buyer-supplier relationships with social governance are more likely to be openly defined and resolved, through enhanced flexibility and solidarity in the exchange relationship (Wuyts and Geyskens, 2005). Social governance utilizes inter-firm trust as a primary foundation to establish desirable behavior (Dyer and Singh, 1998; Carson et al., 2006). Therefore we will review the concept of trust in more detail.
Trust
Previous definitions of trust have involved two main concepts: risk (Mayer et al., 1995) and reliance (Rotter, 1980). Risk is the potential that the exchange partner will resort to behavior that inflicts loss on the other party. Reliance entails the acceptance of one party to let its fate be determined by the exchange partner. Risk creates the opportunity for trust (Rousseau et al. 1998). Under such conditions, a firm’s decision to take action that puts its fate in the hands of the exchange partner is the ultimate sign of trust. In this research, we define trust as the decision to rely on an exchange partner under a condition of risk (Currall and Inkpen 2002) whilst believing that the other partner will not exploit its vulnerabilities or be dishonest (Geyskens et al., 1998; Dyer and Chu, 2003). In general, once a party has crossed the trustworthy threshold, they are expected to continuously behave in that fashion in the future, until proven otherwise.
Uzzi (1997) emphasizes that socially derived social ties and norms emerge from prior exchange. Trust is therefore considered a trait that becomes embedded in a particular social relationship through repeated exchange (Poppo and Zenger, 2002). Poppo and Zenger (2002) state that repeated exchange provides a firm with information about the cooperative behavior of the exchange partner, which allows a firm to make a more informed decision about who to trust and who not to trust. Inkpen and Currall (2004) found that when there is a high level of trust between partners, the adoption of social control mechanisms is more likely.
The strategy literature often focuses on the length of a relationship as a proxy of the closeness between partners in a relationship (Dyer and Chu, 2000). The reasoning derived from these findings is that repeated exchange fosters trust through the experiences gained with an exchange partner’s cooperative behavior. The longer the duration of a relationship, the more repeated exchanges. This leads to the development of trust. We argue that since the foundation of social control is trust, and trust is fostered by repeated interactions, the longer a buyer-supplier relationship’s duration, the more social control mechanisms will be adopted. The following hypotheses are formulated:
H1a: Buyer-supplier relationships with a relatively long duration will result in the adoption of more social control mechanisms.
This reasoning also goes the other way. The shorter a buyer-supplier relationship’s duration, the less likely it is that trust, fostered through repeated interactions, has been established. Thus we hypothesize:
H1b: Buyer-supplier relationship with a relatively short duration will result in the adoption of more formal control mechanisms.
2.2 Formal and Social Control: Substitutes or Complements?
There is an ongoing discussion in the literature about whether these two modes of governance function as complements or as substitutes. Some authors argue in favor of the notion that social and formal control are substitutes (Uzzi, 1997; Dyer and Singh, 1998), while a more recent stream of research suggest that the use of social and formal control mechanisms are used in tandem and function as complements (Poppo and Zenger, 2002; Currall and Inkpen 2002; Seshadri and Mishra 2004; Wuyts and Geyskens, 2005; Li et al., 2010). The reasoning for some researchers to believe that formal and social control function as substitutes is that if trust between partners is sufficient enough to support social governance, combining this with formal governance would be redundant since social governance may govern interfirm exchange effectively (Uzzi, 1997) and formal control mechanisms may result in high additional contracting costs (Dyer and Singh, 1998), implying that complementarity could hardly be economical.
On the contrary, the authors contributing to the more recent stream of research regarding complementarity in this context argue that formal and social governance can work in tandem and provide joint benefit in the exchange relationship for multiple reasons. One line of reasoning is brought forward by Poppo and Zenger (2002), who argue that formal and social control may be utilized in tandem as a safeguard against failure of one of the two types of control. Another reason is suggested by Curral and Inkpen (2002), who argue that social and formal control function as substitutes at different levels of analysis (e.g. interpersonal social relations among top managers vs contractual policies for the operational level). The
data collected by Poppo and Zenger (2002) supported their hypothesis that formal and social control function as complements. An important limitation of their research is the possibly limited generalizability of their findings since the study took place in a U.S. domestic context. The notion of complements is not likely to be generalizable to countries where a sufficient institutional environment (legal and cultural commitment) is lacking (Poppo and Zenger, 2002). Building on these findings, Li et al. (2010) accounted for possible differences between domestic and international buyer-supplier relationships in a Chinese domestic context. They suggested that formal and social governance function as substitutes in a (Chinese) domestic context and that formal and social control complement each other in international buyer-supplier relationships. The first hypothesis was supported, the latter not. They conclude that formal and social control are neither pure complements nor pure substitutes in international buyer-supplier relationships.
We favor the argument brought forward by Curral and Inkpen (2002) that formal and social control work in tandem by functioning as substitutes at different levels of analysis. Longer cooperation will foster inter-personal trust among, for example, floor managers and other employees of the companies working together on the operational level. Implying social governance strengthens on this level of analysis. On another level of analysis however, it might still be necessary to erect safeguards in the form of formal contracts. For example because trust did not yet develop up to a point where managers are confident to (solely) rely on social governance, for instance when the consequences of opportunistic behavior are grave. We hypothesize:
H2: Formal and social control function as complements, rather than as substitutes. 2.3 Environmental Dynamism
Environmental dynamism refers to an environment that changes frequently (Aldrich, 2008). A firm’s environment entails the exogenous disturbances in the context of organizational activity (König, 2009). The environment of a firm has been identified to commonly consist of three sectors: customers, competitors and technology (Jaworski and
Kohli 1993). So an environment is dynamic when for example the needs or preferences of customers are frequently changing. This functions as a snowball effect, since changing customer needs results in competitors trying to fulfill those needs with for example innovative products, which in turn leads to the development of new technology, all together increasing the environmental dynamism. This dynamic environment is one of the determinants of environmental uncertainty. As described earlier in this paper, environmental uncertainty has many determinants, such as behavioral uncertainty (from customers and competitors) and environmental complexity. In this research, we will focus on environmental dynamism, and not on one of the other determinants of environmental uncertainty, because environmental dynamism has been shown to have the strongest effect on environmental uncertainty (Bourgeois, 1980).
The effect of environmental dynamism on governance has been explored by previous research, but the resulting findings are mixed. Some researchers (e.g. Porter, 2008) argue that dynamic environments require firms to move away from social governance, as this allows the firm to better meet the needs of the changing environment by not focusing on a handful of close-tie partners, but on working together with more partners, which might increase flexibility and the ability to better serve a changing market. Others argue that relational governance is appropriate in dynamic environments as supplier flexibility is fostered through social governance (e.g. Lewis, 1995). Joshi and Campbell (2003) studied the effect of environmental dynamism on the adoption of relational governance and found that in dynamic environments, manufacturers adopt (avoid) social governance with suppliers when supplier knowledge is high (low) and when manufacturer collaborative belief is high (low). Building on their findings, we expect that a dynamic environment will result in the adoption of more social control mechanisms in order to foster flexibility and adapt to the changing environment, thereby changing the effect of our expected effect of relationship duration on governance. The underlying argument is that the strategy of a (inter)-firm (relationship) should fit the external environment, which has been supported by empirical research (e.g. Ward and Duray, 2000). The findings mentioned here provide strong arguments to expect environmental dynamism to be a moderator that influences the effect of duration on governance. The following hypotheses are formulated:
H3a: Environmental dynamism positively moderates the effect of duration on the adoption of social control mechanisms.
H3b: Environmental dynamism negatively moderates the effect of duration on the adoption of formal control mechanisms.
Figure 1 on the next page is a graphic representation of our research model.
3. Research Design
This study examines an existing SPSS dataset compiled by dr. J. (Hans) Berger for chapter 4 of his doctoral dissertation ‘’Essays on the Governance of Buyer-Supplier Relationships’’ at the University of Groningen in the Netherlands (2015).
3.1 Data Collection Procedure
The vertical relationship between independent firms operating at successive stages in the production chain is the object of analysis for this study. Since such an relationship is real but not directly observable, there is a potential for measurement error (Selnes and Sallis, 2003). To overcome this potential problem, data were obtained from both sides of the dyad (Selnes and Sallis, 2003). The industries included in this study were: machinery, automotive, pharmaceuticals, chemicals, semiconductors and electronics. The choice of these industries was based on prior research describing different knowledge strategies in these industries (Lichtenthaler and Ernst, 2007), hence supporting variance. Service firms were excluded from the study since manufacturing firms show a higher probability to acquire the external knowledge needed to come up with new products or processes or improve existing ones (e.g, Arbussà and Coenders, 2007).
To prevent selection bias and following Johnson et al. (2004), this study follows a 2x2 design, with average or crucial importance of components or products on one dimension, and relationship duration greater or less than two years on the other dimension. Firstly the buyer informants were recruited. Subsequently they were asked to provide the names of their contacts in the supplier organization. The researchers contacted these identified contacts and asked them to participate in the study. All buyer informants were located in the Netherlands and were interviewed following a standardized questionnaire. Supplier informants were located all over the world and were asked to fill in a survey which they received and returned by (e)-mail. All responses were treated with absolute confidentiality by only including company codes in the database in order to be able to match the dyads. By determining the respondents’ current working position, the percentage of time they spend on the relationship and the number of years they have been involved in the relationship, the researchers checked for the knowledgeability and involvement of the respondents (Campbell, 1955). In this way between June 2011 and April 2013, data from 166 matched-pair relationships were obtained.
3.2 Measures
The researchers conducting this study used existing scales from previous research.
Some questions in the first questionnaire were revised based on feedback resulting from interviewing colleagues. The revised questionnaire was pre-tested among seven buyers and four suppliers. The questionnaire was offered in both Dutch and English to prevent nonresponse. All translations were based on the English original and then back-translated from Dutch into English. The format and scales used to measure the variables examined in this paper are shown in appendix A. The questions used in this paper are all Likert scales, ranging from ‘’strongly disagree’’ (1) to ‘’strongly agree’’ (7). Except for the question measuring relationship duration. The measures for contracting were obtained from Desphande and Zaltman (1982), Cannon and Perreault (1999), Buvik and Reve (2002) and Jansen et al. (2006). Social governance was measured by questions about flexibility norms, information exchange norms and solidarity norms, all adopted from Heide and John (1992). Dynamism is measured by scales adopted from Selnes and Sallis (2003) on environmental dynamism and Achrol and Stern (1988) on market diversity. Performance is measured by scales adopted from Lane et al. (2001) regarding explorative learning performance and from Selnes and Sallis (2003) regarding exploitative learning performance. It should be noted that performance is only included in our model to test H2, on which we will elaborate in the statistical procedures section. This is why we did not hypothesize any effect of governance mode on performance, as this is not within the scope of this research.
3.3 Statistical Procedures
In order to make the analysis more comprehensible, we first checked if we can make new sum variables by grouping the questions measuring our constructs: environmental dynamism, social governance, formal governance and performance. Since the underlying dimensions of these variables are known, because scales are used from previous research, we performed a reliability analysis to test if these scales are also ‘strong enough’ in this research. Therefore, in order to measure the internal consistency of these new items (e.g. the strength to proceed with the new sum variables instead of the original items), Cronbach’s alpha was calculated and new sum variables were computed.
In order to analyze how relationship duration influences the mode of governance, we performed two linear regression analyses with relationship duration regressed on either formal or social governance. To account for possible differences between buyers and suppliers, we split the combined database (n=332) into a ‘supplier-only’ and a ‘buyer-only’ dataset (n=166, each) and compared the two groups. The moderating effect of environmental dynamism was tested by adding the main effect and the interaction effect to the regression model.
Following Poppo and Zenger (2002), we test if social and formal governance act as substitutes or complements (hypothesis 2 in this study) by calculating an interaction term between social and formal governance and regress this variable on exchange performance. This allows us to test whether the marginal effects of formal governance (or social governance) rise as social governance (or formal governance) increases (Poppo and Zenger, 2002). The direction of the coefficients tells us whether social and formal governance act as substitutes (negative relationship) or as complements (positive relationship) (Poppo and Zenger, 2002). We calculated the interaction term and performed the regression analysis.
3.4 Statistical Analysis and Results
Reliability analysis on the questions measuring environmental dynamism showed that question 6.1 until 7.4 had a α<0,7 (0,680). Including question 7.5 would result in a lower Cronbach’s alpha (α=0,630) so we removed this item. Even though the value is below the general cutoff value of .7, the reliability of a scale only becomes truly questionable when it gets <.6. Since the value for questions 6.1 until 7.4 comes so close to the general cutoff value, we computed a sum variable measuring environmental dynamism using these questions. Reliability analysis on the questions measuring formal governance showed that questions 14.2 until 14.6 had a α>0,7 (0,845). Including question 14.1 (which had to be recoded) would result in a lower Cronbach’s alpha (α=0,825). We removed this item and computed a sum variable measuring formal governance mode using questions 14.2 until 14.6. Lastly, reliability analysis on the questions measuring social governance showed that questions 15.1
until 15.10 had a α>0,7 (0,866) and that deleting any of these questions would not result in a higher Cronbach’s alpha. Instead of making a new variable by summing the original variables, we took the average of these variables. The advantage of this technique is that the result is easier to interpret by leaving the 7-point Likert scale intact. In this way, three new sum variables have been calculated, named: ‘EnvDyna’, ‘FORMgov’ and ‘SOCgov’.
In order to test H1, a simple linear regression was calculated to predict the adoption of governance based on relationship duration. The results are presented in table 1.1 below.
Effect Tested Source R2 B Sig.
H1a: Relationship duration regressed on social governance Buyer 0,047 -0,018 p=0,006** Supplier 0,004 -0,006 p=0,402 H1b: Relationship duration regressed on formal governance Buyer 0,003 -0,008 p=0,492 Supplier 0,003 -0,006 p=0,531 †p<.10, *p<.05, **p<.01
Table 1.1: Hypothesis 1a and 1b - Results of regression analysis
The regression analysis where we regressed relationship duration on social governance (H1a) was found significant for the buyer-only database, R2=0,047, F(1,159) =7,77, p=0,006, but not for the supplier-only database, R2=0,004, F(1,158) =0,71, p=0,402. What is striking about the significant result for the buyer-only database is that the direction of the relationship appears to be opposite compared to what was predicted (B= -0,018). Although the model explains only 4,7% of the variation, we conclude that the duration of a buyer-supplier relationship significantly influences the adoption of social governance for buyers, but not for suppliers, and that the direction of this relationship is opposite to what was predicted. Therefore H1a is not supported.
The regression analysis where we tested H1b by regressing relationship duration on
formal governance was not significant for both buyers, R2=0,003, F(1,158) =0,46, p=0,492, and suppliers, R2=0,003, F(1,157) =0,39, p=0,531. We conclude that the duration of a buyer-supplier relationship does not significantly influence the adoption of formal governance. Thus H1b is not supported.
Given the highly unexpected finding for the direction of the relationship as predicted by H1a, we performed three additional linear regressions, accounting for the different indicators used to measure social governance: flexibility norms (questions 15.1 - 15.3), information exchange norms (questions 15.4 - 15.7) and solidarity norms (questions 15.8 - 15.10). We performed reliability analyses for the questions measuring flexibility norms (α>0,7 (0,722)), information exchange norms (α>0,7 (0,767)) and solidarity norms (α>0,7 (0,829)) and computed the new sum variables: ‘socFLEX’, ‘socINFOEX’ and ‘socSOLID’. We regressed relationship duration on each of these sum variables. The results are shown below in table 1.2.
Effect Tested Source R2 B Sig.
Relationship duration regressed on socFLEX Buyer 0,047 -0,02 p=0,006** Supplier 0,005 -0.007 p=0,368 Relationship duration regressed on socINFOEX Buyer 0,028 -0,018 p=0,031* Supplier 0,021 -0,015 p=0,070† Relationship duration regressed on socSOLID Buyer 0,019 -0,015 p=0,081† Supplier 0,006 0,007 p=0,333 †p<.10, *p<.05, **p<.01
Table 1.2 - Results of relationship duration regressed on social governance indicators The results show that the influence of relationship duration on flexibility norms and
information exchange norms is slightly negative and statistically significant for the buyers. For the suppliers, only the regression with information exchange norms as the dependent variable yielded a significant result (B=0,021, p<0,1, p=0,070). The result for solidarity norms is significant for the buyers (B=0,019, p<0,1, p=0,081), but not for the suppliers.
We tested hypothesis 2 by calculating an interaction term between social and formal governance and regressing this variable on exchange performance, for which we made a new sum variable by grouping the questions measuring explorative and exploitative learning performance (α>0,7 (0,850)) . The results are presented in table 2.1 below.
Effect Tested Variable Source B Sig.
H2: Interaction governance modes regressed on performance FORMgov Buyer 0,523 p=0,210 Supplier 0,227 p=0,535 SOCgov Buyer 0,675 p=0,038* Supplier 0,383 p=0,136 Interaction: FORMgov x SOCgov Buyer -0,065 p=0,397 Supplier -0,022 p=0,726 †p<.10, *p<.05, **p<.01
Table 2.1: Hypothesis 2 - Interaction governance modes regressed on performance
The overall model was significant (p<0,05) for both the buyer-only and supplier-only database. We did not hypothesize a direct effect of either mode of governance on performance. For the sake of completeness we included and analyzed the main effect. This yielded a nonsignificant result with respect to formal governance for both the buyer-only and supplier-only database. For social governance, the results were nonsignificant for the
supplier-only database, but significant for the buyer-only database (B=0,675, p<0,05, p=0,038). Hypothesis 2 is not supported since the interaction effect yielded nonsignificant results for both the buyer-only database (p>0,05, p=0,397) and the supplier-only database (p>0,05, p=0,726). Thus our findings suggest that social and formal governance are neither pure complements nor substitutes.
It might be possible that by grouping the questions measuring performance in our dataset together the outcome is affected, which could explain our unexpected findings. To account for possible differences between explorative and exploitative learning performance, we performed two additional linear regressions, accounting for the different indicators used to measure performance. We performed reliability analyses on the questions measuring explorative learning performance (questions 8.1 – 8.5, α>0,7 (0,828)) and exploitative learning performance (questions 9.1 – 9.7, α>0,7 (0,749)) and computed the new sum variables: ‘exploitPERF’ and ‘explorePERF’. We regressed the interaction term of social and formal governance on each of these sum variables. The results are shown in table 2.2
Effect Tested Variable Source B Sig.
regressed on exploitative performance SOCgov Buyer 1,094 p=0,001** Supplier 0,531 p=0,024* Interaction: FORMgov x SOCgov Buyer -0,131 p=0,082† Supplier -0,047 p=0,417 †p<.10, *p<.05, **p<.01
Table 2.2: Results of governance interaction regressed on performance indicators
The overall model was significant for the model with exploitative learning performance as the dependent variable (p<0,01) for both the buyer-only and supplier-only database. The model with explorative learning performance as its dependent variable was significant for the buyer-only database (p<0,05, p=0,021) but not for the supplier-only database (p>0,1, p=0,176). The results shows that our previous findings are blurred because of the fact that we grouped explorative and exploitative learning performance together in one sum variable. By including explorative and exploitative learning performance separately in a regression, we can see that the effect of various variables now becomes significant. We did not hypothesize a direct effect of either mode of governance on performance, but included the main effect for the sake of completeness. The model with explorative learning performance as its dependent variable yielded only nonsignificant results. However, the model where exploitative learning performance was included as the dependent variable yielded several significant results. For the buyer-only database, a significant result with respect to both social (B=1,094, p<0,01, p=0,001) and formal governance (B=0,842, p<0,05, p=0,041) was found. In the supplier-only database, a significant result was found for social governance (B=0,531, p<0,05, p=0,024). The effect of the interaction term on exploitative performance was significant for the buyer-only database (B=-0,131, p<0,1, p=0,082) but not for the suppliers-only database. As mentioned in the statistical procedures section, the direction of the coefficient tells us whether social and formal governance act as substitutes (negative relationship) or as complements (positive relationship). The relationship appears to be
negative, and thus H2 is not supported.
To test H3a and H3b, we included environmental dynamism in the model and tested the main effect and the interaction effect (EnvDyna x Duration). The results are presented in table 3 below.
Effect Tested Variable Source B Sig.
Table 3: Hypothesis 3a and 3b - the moderating effect of environmental dynamism
The model with social governance as the dependent variable was significant for the buyer-only database (p<0,05, p=0,039) but not for the supplier-only database (p>0,1, p=0,348).The model where formal governance was included as the dependent variable was nonsignificant for both the supplier-only (p>0,1, p=0,158) and the buyer-only database (p>0,1, p=0,705). We did not hypothesize a direct effect of environmental dynamism on governance mode. For the sake of completeness we included and analyzed the main effect. This yielded a nonsignificant result for both the buyer-only and supplier-only database. The table shows that H3a was not supported for both the buyers (p>0,05, p=0,443) and suppliers (p>0,05, p=0,205). H3b was not supported since the overall model for both the buyer-only and supplier-only database was nonsignificant.
4. Discussion & Conclusion
The main goal of this study was to provide a continuation of previous research by shedding more light on the antecedents of governance mode in buyer-supplier relationships. Based on the findings we can now answer the research questions.
RQ1: What is the effect of buyer-supplier relationship duration on the adoption of social control?
This research question was tested by hypothesis 1a. The hypothesized effect of the effect of relationship duration on social governance was that the longer the duration of the relationship would last, the more social governance structures would be adopted due to the development of trust. Linear regression analysis showed a significant effect for the buyer-only database, but not for the supplier-only database. The direction of the significant relationship found in the buyer-only database was opposite to the one hypothesized. Instead, our findings suggest that a longer relationship duration results in the adoption of less social modes of governance. One possible explanation for this could be that relatively long relationships tend to be very serious; implying that a lot has been build and is dependent on
the relationship, such as asset specific investments and performance outcomes which are highly dependent on the relationship. In order to safeguard against opportunistic behavior, managers might feel more at ease by establishing contractual safeguards as opposed (or complementary to) social governance.
This brings us to another possible explanation, namely that the effect of relationship duration on trust might be spurious (the two variables are not causally related to each other, but they might be wrongly inferred that they are due to (a) unseen factor(s)). If managers even after a substantial relationship duration, still feel the need to employ formal governance and even less social governance, trust did not develop up to a point where social governance is deemed sufficient, or trust in itself is not deemed sufficient enough by managers to govern business relations. McAllister (1995) distinguishes between two types of trust: cognitive-based trust, which is based on ‘constituting evidence of trustworthiness’, and affect-based trust, which has its roots in emotional bonds. McAllister states that it is affect-based trust that is able to mitigate fears of opportunistic behavior. Since social governance does not rely on formal monitoring of a partner’s performance or activities, the potential for opportunistic behavior is increased. In order to be effective, social governance must be supplemented by affect-based trust which will promote the belief that a partner will not take advantage on the lack of formal monitoring and resort to opportunistic behavior (Mc Allister, 1995). It might thus be possible that relationship duration does develop trust, but that this is mainly cognitive-based trust. Perhaps it is not the relationship duration in itself that fosters affect-based trust, but the events that happen during that period, such as successfully completing projects or pleasant personal encounter.
This yields promising avenues of future research, which will be discussed later on. In addition, these findings show that there is a substantial difference between buyers and suppliers, proving the value of the dyadic data used in this study and need for future researchers to account for these differences in their data collection.
RQ2: What is the effect of buyer-supplier relationship duration on the adoption of formal control?
This research question was tested by hypothesis 1b. The hypothesized effect of the effect of relationship duration on formal governance was that a relatively short duration of the relationship will result in the adoption of more formal control mechanisms. Linear regression analysis showed nonsignificant results for both the buyer-only and supplier-only database. We conclude that the duration of a buyer-supplier relationship does not significantly influence the adoption of formal governance. This finding is somewhat surprising since our findings for H1a suggest that a longer relationship duration would result in the adoption of less social governance, and thus one would expect that formal governance somewhat increases. But our findings suggest that this is not the case and that adoption of less social governance does not lead to increased adoption of formal governance.
One possible explanation for this, is that our model is not strong enough to account for significant differences in both modes of governance. Since the effect of relationship duration on social governance is so small, it might be the case that managers do not deem it necessary to account for this change by increasing formal governance, for example by writing additional clauses.
RQ3: Does environmental dynamism have an effect on the effect of relationship duration on governance mode, and if so in which direction?
The hypothesized effect of environmental dynamism was that environmental dynamism positively moderates the effect of duration on the adoption of social control mechanisms (H3a) and negatively moderates the effect of duration on the adoption of formal control mechanisms (H3b). Our findings do not support H3a and b for both the buyer-only and supplier-only database, implying that environmental dynamism does not have a significant effect on the effect of relationship duration on the adoption of social or formal governance. We derived our hypothesis by building on Joshi and Campbell (2003), who studied the effect of environmental dynamism on the adoption of relational governance and found that in dynamic environments, manufacturers adopt (avoid) social governance with suppliers when supplier knowledge is high (low) and when manufacturer collaborative belief is high (low). An explanation for our nonsignificant findings might therefore be that the
required conditions of having high supplier knowledge and high manufacturer collaborative belief are not met or have been mixed together, possibly explaining the nonsignificant results. The implications of these findings for future research will be elaborated on in the next section.
RQ4: Do formal and social control act as substitutes or complements?
Our final research question dealt with the question whether formal and social control function as complements or substitutes. The hypothesized effect was that formal and social control function as complements, rather than as substitutes. This hypothesis is not supported since the interaction effect yielded only a significant result for the buyer-only database with exploitative learning performance as the dependent variable. The direction of the coefficient is negative, which would imply that social and formal governance function as substitutes. This result however, should be treated with caution because the result was only significant at the 90% confidence level.
This result shows that the findings of Poppo and Zenger (2002) are, as speculated by themselves in their paper, not generalizable to an international context. Our findings are in line with Li et al. (2010), who also found no support for a complementary nature between formal and social control in international buyer-supplier relationships. It is crucial emphasizing that their study took place in a Chinese domestic context, which means that an international relationship implies a relationship between a Chinese based firm with a firm based in another country. This brings us to the possible explanation of why the results are different for different countries. As suggested by Poppo and Zenger (2002), the effectiveness of formal governance is highly dependent on the institutional environment. If there is a well-established institutional environment, such as in the U.S., formal contracts tend to be efficient and can effectively be used in tandem with social governance. In countries where the institutional environment is different, for example in China, this might not be the case, as shown by Li et al. (2010). This implies that our study has important limitations and implications for future research, on which we will elaborate later on.
Another possible explanation for the contradictory findings is that the construct of
social governance is measured by different questions. For example, Poppo and Zenger (2002) measure social governance with questions regarding open communication and sharing of information, trust, dependence, and cooperation. The database used for this research measured social governance with questions regarding flexibility norms, information exchange norms and solidarity norms. If the same questions used by Poppo and Zenger (2002) were used in this study, it might be possible the outcomes will differ from the ones currently presented in this paper. Future research implications based on these findings are discussed in the next section.
5. Limitations & Future Research Implications
This study has important limitations that provide promising avenues of future research but also caution in generalizing the results presented. The most important limitation of this study is that we did not make a distinction between the countries where the companies are situated and whether or not the buyer-supplier relation is international or domestic. This has multiple implications. First, the effectiveness of formal contracts largely depends on the legal institutions, since a company cannot rely on contracts without an enforceable system. As these differ per region/country (the legal institutions in Western Europe are much more well-established as those in for example South American countries) a manager's decision to adopt a certain (combination of) mode(s) of governance might be largely dependent on that situation. The results presented here might therefore not be applicable to all countries and regions. This reasoning might also be the explanation for our findings that even after a substantial relationship duration, managers still feel the need to employ formal governance and even less social control mechanisms. Controlling for the effectiveness of the legal institutions is a future research opportunity worth exploring.
Third, the argumentation for the complementary nature of social and formal governance as brought forward by Curral and Inkpen (2002), who argue that social and formal control function as substitutes at different levels of analysis, offers interesting future research opportunities by taking into account possible differences in governance mode between different levels of the organization. By involving multiple respondents from
different levels in the organization, future research might be able to provide us with a more detailed understanding of the mechanisms at play in the governance of buyer-supplier relationships.
Fourth, our nonsignificant moderating effect of environmental dynamism leads us to believe that this effect is highly dependent on the conditions of high vs low supplier-knowledge and manufacturer collaborative belief, as brought forward by Joshi and Campbell (2003), which we did not measure in this study. Consequently, future research should create conditions of different levels of supplier-knowledge and manufacture collaborative belief to provide us a better understanding of the moderating effect of environmental dynamism.
Fifth, the sample used for this study did not measure different types of formal contracts, such as specific types of clauses that are used to write the contract or the number of pages the contract consists of. More detailed measures should be able to distinguish between different types of formal contracts and account for possible differences among the interrelations between different ‘levels’ of formal governance and the other variables used in this study. Of equal importance are the measurements used to measure social governance. As mentioned before, measurement of this construct differs across studies. It might be fruitful to develop a new scale measuring governance mode, which could be used in all future studies to increase the reliability and validity when comparing results, or to perform a meta-analysis on the existing scales to determine the validity of all scales measuring social governance.
Lastly, this study shows that there exist significant differences between buyers and suppliers and thus future research is encouraged to collect data from both sides of the dyad. Even though collecting this kind of data is hard and time consuming, the rewards outweigh the costs.
References
Achrol, R. S., & Stern, L. W. (1988). Environmental determinants of decision-making uncertainty in marketing channels. Journal of marketing research, 36-50.
Alchian, A. A., & Demsetz, H. (1972). Production, information costs, and economic organization. The American Economic Review, 62(5), 777-795.
Aldrich, H. (2008). Organizations and environments. Stanford University Press.
Arbussà, A., Coenders, G. (2007). Innovation activities, use of appropriate instruments and absorptive capacity: Evidence from Spanish firms. Research Policy, 36: 1545-1558.
Arranz, N., & Arroyabe, J. C. (2012). Effect of formal contracts, relational norms and trust on performance of joint research and development projects. British Journal of Management , 23(4), 575-588.
Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of management, 17(1), 99-120.
Beckman, C.M., Haunschild, P.R., Phillips, D.J., 2004. Friends or strangers? Firm- specific uncertainty, market uncertainty, and network partner selection.
Or-ganization Science, 15 (3), 259–275.
Berger, H. J. 2015. Essays on the governance of buyer-supplier relationships. Unpublished doctoral dissertation. University of Groningen, Netherlands.
Bourgeois, L. J. (1980). Strategy and environment: A conceptual integration. Academy of management Review, 5(1), 25-39.
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. Scandinavian Journal of Management, 18(3), 261-284.
Campbell, D. T. (1955). The informant in quantitative research. American Journal of
sociology, 339-342.
Cannon, J. P., & Perreault Jr, W. D. (1999). Buyer-seller relationships in business markets.
Journal of marketing research, 439-460.
Carson, S.J., Madhok, A., Wu, T., 2006. Uncertainty, opportunism, and governance: the effects of volatility and ambiguity on formal and relational contracting. Academy of Management Journal, 49 (5), 1058–1077.
Currall, S. C., & Inkpen, A. C. (2002). A multilevel approach to trust in joint ventures. Journal of International Business Studies, 33(3), 479-495.
Das, T.K. and Teng, B.S. (2001). Trust, Control, and Risk in Strategic Alliances: An Integrated Framework Source. Organization Studies, 22(2), 251–283.
Deshpande, R., & Zaltman, G. (1982). Factors affecting the use of market research information: A path analysis. Journal of marketing research, 14-31.
Dyer, J. H., & Singh, H. (1998). The relational view: Cooperative strategy and sources of interorganizational competitive advantage. Academy of management review, 23(4), 660-679. Dyer, J.H, Chu, W., 2000. The determinants of trust in supplier-automaker relation-
ships in the U.S., Japan and Korea. Journal of International Business Studies , 31 (2), 259–285.
Dyer, J.H., Chu, W., 2003. The role of trustworthiness in reducing transaction costs and
improving performance: empirical evidence from the United States, Japan, and Korea. Organization Science, 14 (1), 57–68.
Fehr E, Gachter S. 2000. Do incentive contracts crowd out voluntary cooperation? Working paper no. 34, Institute for Empirical Research in Economics, University of Zurich. Fryxell, G.E., Dooley, R.S., Vryza, M., 2002. After the ink dries: the interaction of trust and control in US-based international joint ventures. Journal of Management Studies, 39 (6), 865–886.
Geyskens, I., Steenkamp, J.E.M., Kumar, N., 1998. Generalizations about trust in marketing channel relationship using meta-analysis. International Journal of Research in Marketing, 15 (3), 223–248.
Heide, J. B., & John, G. (1992). Do norms matter in marketing relationships? The Journal of Marketing, 32-44.
Inkpen, A.C., Currall, S.C., 2004. The coevolution of trust, control, and learning in joint ventures. Organization Science, 15 (5), 586–599.
Jansen, J. J., Van Den Bosch, F. A., & Volberda, H. W. (2006). Exploratory innovation, exploitative innovation, and performance: Effects of organizational antecedents and environmental moderators. Management science, 52(11), 1661-1674.
Jaworski, B. J., & Kohli, A. K. (1993). Market orientation: antecedents and consequences. The Journal of marketing, 53-70.
Johnson, J. L., Sohi, R. S., & Grewal, R. (2004). The role of relational knowledge stores in interfirm partnering. Journal of Marketing, 68(3), 21-36.
Joshi, A.W., Campbell, A.J., 2003. Effect of environmental dynamism on relational
governance in manufacturer-supplier relationships: a contingency framework and an empirical test. Journal of the Academy of Marketing Science, 31 (2), 176–188.
König, F. (2009). The Uncertainty-Governance Choice Puzzle Revisited: Predictions from Transaction Costs Economics, Resource-Based Theory, and Real Options Theory. Springer Science & Business Media.
Lane, P. J., Salk, J. E., & Lyles, M. A. (2001). Absorptive capacity, learning, and performance in international joint ventures. Strategic management journal, 22(12), 1139-1161.
Lewis, J. D. (1995). The connected corporation: how leading companies win through
customer-supplier alliances. Free Press.
Li, Y., Xie, E., Teo, H.-H., & Peng, M. W. (2010). Formal control and social control in domestic and international buyer-supplier relationships. Journal Of Operations Management, 28(4), 333-344.
Lichtenthaler, U., Ernst, H. (2007). Developing reputation to overcome the imperfections in the markets for knowledge. Research Policy, 36, 37-55.
Lin, Z. J., Peng, M. W., Yang, H., & Sun, S. L. (2009). How do networks and learning drive M&As? An institutional comparison between China and the United States. Strategic Management Journal, 30(10), 1113-1132.
Madhok, A., 2002. Reassessing the fundamentals and beyond: Ronald Coase, the transaction cost and resource-based theories of the firm and the institutional structure of production. Strategic Management Journal, 23 (6), 535–550.
Mayer, R. C., Davis, J. H., & Schoorman, F. D. (1995). An integrative model of organizational trust. Academy of management review, 20(3), 709-734.
McAllister, D. J. (1995). Affect-and cognition-based trust as foundations for interpersonal cooperation in organizations. Academy of management journal, 38(1), 24-59.
Nooteboom, B. (1999). Inter-firm alliances: Analysis and design. Psychology Press.
Poppo, L., Zenger, T., 2002. Do formal contracts and relational governance function as substitutes or complements? Strategic Management Journal, 23 (8), 707– 725.
Porter, M. E. (2008). Competitive strategy: Techniques for analyzing industries and competitors. Simon and Schuster.
Rindfleisch, A., Heide, J., 1997. Transaction cost analysis: past, present, and future applications. The Journal of Marketing, 61 (4), 30–54.
Rotter, J. B. (1980). Interpersonal trust, trustworthiness, and gullibility. American psychologist, 35(1), 1.
Rousseau, D. M., Sitkin, S. B., Burt, R. S., & Camerer, C. (1998). Not so different after all: A cross-discipline view of trust. Academy of management review, 23(3), 393-404.
Selnes, F., and Sallis, J. 2003. Promoting relationship learning. Journal of Marketing, 67(July), 80-95.
Seshadri, S., & Mishra, R. (2004). Relationship marketing and contract theory . Industrial Marketing Management, 33(6), 513–526.
Uzzi, B. (1997). Social structure and competition in interfirm networks: The paradox of embeddedness. Administrative science quarterly, 35-67.
Ward, P. T., R. Duray. 2000. Manufacturing strategy in context: Environment, competitive
strategy and manufacturing strategy. Journal of Operations Management, 18(2), 123–138. Williamson, O.E., 1985. The Economic Institutions of Capitalism. Free Press, New York. Williamson, O. E. (1991). Comparative economic organization: The analysis of discrete structural alternatives. Administrative science quarterly, 269-296.
Williamson, O. E. (2002). The theory of the firm as governance structure: from choice to contract. The Journal of Economic Perspectives, 16(3), 171-195.
Williamson, O.E., 2008. Outsourcing: Transaction cost economics and supply chain management. Journal of Supply Chain Management, 44 (2), 5–16.
Wuyts, S., Geyskens, I., 2005. The formation of buyer–supplier relationships: detailed contract drafting and close partner selection. The Journal of Marketing, 69 (4), 103–117 Zhou, X., Li, Q., Zhao, W., Cai, H., 2003. Embeddedness and contractual relationships in China’s transition economy. American Sociological Review, 68 (1), 75–102.
