The dynamics of contractual and relational governance: Evidence from long-term public–private procurement arrangements

This paper investigates the detail and dynamics of how contractual and relational governance mechanisms are deployed in managing complex, long-term public–private supply arrangements. Using empirical data from two UK Private Finance Initiative (PFI) cases, the paper analyses the interplay of governance mechanisms along a timeline of project phases. Conceptual and practical findings confirm that relational and contractual mechanisms are indeed complementary forms of exchange governance but also that the relational intentions of all parties frame whether the contract is interpreted as a written sign of distrust or commitment. Equally, relational and contractual governance follow different development paths: both follow cumulative trajectories but (a) inter-personal relational mechanisms are more incremental and fragile, whereas (b) contractual mechanisms move with fewer degrees of freedom and ‘anchor’ the exchange throughout the life cycle. Finally, the different development characteristics of relational and contractual mechanisms mean that their dynamic interplay does not follow consistent patterns. The paper concludes with suggestions for more longitudinal studies.     

The influence of relational experience and contractual governance on the negotiation strategy in buyer–supplier disputes

This paper theoretically refines and empirically extends the debate on the type of interplay between relational experience and contractual governance in an under-researched area: supply chain disputes. We define relational experience as either cooperative or competitive; distinguish between control and coordination functions of contractual governance; and assess their interplay on the negotiation strategy used in disputes. Using a unique data set of buyer–supplier disputes, we find, in particular that increasing contractual control governance weakens the positive effect of cooperative relational experience on cooperative negotiation strategy. However, increasing contractual control governance for a buyer–supplier dyad with competitive relational experience will increase cooperative negotiation strategy. Contractual coordination governance reinforces the positive effect of cooperative relational experience. Through this study, we reach a better understanding of how and when contractual and relational governance dimensions interact; rather than whether they act as substitutes or complements as has been studied in prior research. We discuss the implications of these findings for the field of supply chain management.     

Strategic interdependence, governance effectiveness and supplier performance: A dyadic case study investigation and theory development

Inter-organizational exchange governance approaches are often characterized as two broad types: relational and transactional. However, in fast changing business contexts, the contextual contingencies do not present ideal conditions for practicing purely relational or transactional approach. Understanding the dynamic of key contextual factors and their effects on a firm's resource capabilities and inter-organizational power structure is crucial for identifying the appropriate governance structure over time. In this paper we explore the exchanges between an OEM and five of its strategic suppliers that operate in high-end, short product life cycle motorbike industry, to understand the key contextual factors and the relationships among business context, governance structure, and exchange practices in a dyadic context. It is observed that firms deviate from the conventional choices of either transactional or relational governance to a combination of contractual and relational aspects to make the governance structure effective. Based on case studies, a theoretical framework is proposed to explain the rationale, feasibility and effectiveness of combining contractual and relational aspects in different contexts. The framework suggests that the degree of strategic interdependence between the trading partners fundamentally drives the effectiveness of governance structure and exchange practices.     

Revisiting the interplay between contractual and relational governance: A qualitative and meta-analytic investigation

Although extant literature has shown that formal contracts and relational governance play a key role in interorganizational relationships, the nature of their interplay still remains equivocal. To better understand the relationships between contractual and relational governance, we conducted a qualitative review and meta-analysis of the existing literature. Meta-analytic results from 33,051 interorganizational relationships across 149 empirical studies have indicated that contractual governance is positively related to both sides of relational governance—trust and relational norms. Our results have also indicated that contracts, trust, and relational norms jointly improve satisfaction and relationship performance and jointly reduce opportunism. These findings provide strong evidence for the complementarity arguments of the contractual–relational governance relationships and their joint impacts on performance. We also found that the mutual relationships between contractual and relational governance are moderated by the institutional environments, the interorganizational relationship type and length, and the construct measurement of contracts. Overall, this study provides new insights on when contractual and relational governance complement or substitute each other. We discuss the implications of our study for theory and practice and propose a research agenda for future research on governance in interorganizational relationships.     

The emergence of the pluralism construct and the inpatriation process

The concept of centric (i.e. ethnocentric, polycentric, regiocentric and geocentric) orientations, applied to strategic international human resource management (SIHRM), has been argued to reflect the corporate top management dominant logic of managing and staffing multinational subsidiaries in hierarchical multinational corporations (MNCs). In this paper, we introduce a new, complementary concept of pluralistic strategic global human resource management (SGHRM) orientation for network-oriented global organizations. Moreover, we develop an integrative framework for SIHRM/SGHRM orientations, which accommodates both centric and pluralistic perspectives. The dimensions used in the framework development include: 1) nature of the headquarters-subsidiary exchange (transactional/relational); and 2) the differentiation of dominant relational norms governing co-operation in the multinational network (obligatory/consensual). By focusing on the interaction between formal and informal contractual and normative dimensions, we derive four distinct SIHRM/SGHRM orientations (exportive, adaptive, integrative and pluralistic). This conceptual framework offers insights into how the innovative global staffing practice of inpatriation may foster the emergence of the unique outcomes of social capital, trust, commitment and legitimacy in global networks.     

Relationship governance mechanisms and collaborative performance: A relational life-cycle perspective

Governance mechanisms protect the investments involved in transactions and thereby facilitate and promote sustainable and cooperative relationships; however, the empirical results of prior research concerning the relationship between governance mechanisms and collaborative performance are inconsistent. Based on transaction cost economy (TCE) and social exchange theory (SET), a relational life-cycle framework that considers the dynamic evolution of collaborative relationships and re-examines the relationship between governance mechanisms and collaborative performance was developed in this study. Evidence from 124 manufacturers in Taiwan indicates that the effects of governance mechanisms on collaborative performance differ according to the current life-cycle phase. In the exploration phase, contractual control exerts a positive impact on cooperative performance. In the buildup and maturity phases, relational control remains positively associated with collaborative performance, whereas the impact of contractual control is insignificant. In the decline phase, both contractual control and relational control have an insignificant impact on collaborative performance. Herein, we discuss the implications of our empirical findings and their relevance to managers.     

The interplay of governance mechanisms in complex procurement projects

Although many studies have investigated governance in inter-firm relationships, little is known about the simultaneous use of several governance mechanisms in complex procurement projects and their impact on project outcomes. In a case study about a complex procurement project in the Norwegian oil and gas industry, we investigate the interplay of contractual incentives, authority and relational governance. The project faced many problems with cost overruns and schedule delays. The study clearly illustrates the interrelationships between governance mechanisms and their effect on project outcomes. The findings suggest that relational governance (trust) is only beneficial for project outcomes when it is accompanied by contractual incentives and control systems (authority). Relational governance in itself does not guarantee an effective and beneficial interplay of all three mechanisms in a way that positive project outcomes are generated.     

The effect of cross-organizational governance on supply chain resilience: A mediating and moderating model

This study examines the effect of a novel antecedent, namely cross-organizational governance (which can be further divided into contractual and relational governance), on supply chain resilience. Additionally, it explores the mediating and moderating effects of supply chain collaboration and institutional environment, respectively, on the relationship between cross-organizational governance and supply chain resilience. Accordingly, a research model, together with four hypotheses, is constructed based on institutional theory. These are further tested based on data collected from a single-respondent survey of 358 Chinese manufacturing companies. The results reveal that contractual and relational governance have significant positive effects on supply chain resilience; supply chain collaboration plays a partially mediating role and institutional environment plays a moderating role in the effects of contractual and relational governance on supply chain resilience. This study enriches the understanding of the relationships between cross-organizational governance, supply chain collaboration, supply chain resilience, and institutional environment. It also provides a reference for supply chain managers’ decision-making activities.     

The influence of contractual and relational factors on the effectiveness of third party logistics relationships

Outsourcing has become popular in both management literature and practice, but few studies have examined the effects of two important and potentially complementary elements – contractual and relational elements – on the effectiveness of logistics outsourcing relationships. It is theorized that contract formality, the thoroughness of contract negotiations, trust and commitment increase the effectiveness of 3PL provider–client relationships. For empirical validation a survey was carried out in the 3PL industry among both 3PL providers and clients. Using PLS path modelling, we observed that for both LSPs and clients, contract formality, trust and commitment are all positively related to relationship effectiveness. The results for negotiation thoroughness are mixed. The model explains 59% (LSPs) and 60% (clients) of the variance in relationship effectiveness. It is concluded that both ‘hard’ contractual aspects and ‘soft’ relationship aspects are important for effective supply chain collaboration. Theoretical and managerial implications are provided.     

The dynamics of business service exchanges: Insights from logistics outsourcing

This paper offers insights about the dynamics of business service exchanges. We draw on the interaction approach, contracting theory and the notion of qualification from economic sociology to develop an analysis frame for such dynamics. We then apply this frame to a single, longitudinal case study. Contrary to the extant service supply literature assuming that service definitions remain (or should remain) fixed throughout the purchasing process, our findings suggest that, under high uncertainty conditions, the service exchange object is (re)shaped through iterative cycles of stabilisation and destabilisation. This study also reveals a connection between service definition and relationship governance dynamics—uncertainty and opportunism risks related to service destabilisation can be managed through dynamic deployment of relational, contractual and economic mechanisms. This paper also contributes to our understanding of the contract as basis for interaction and openness and offers an extension of qualification theory to complex business-to-business (B2B) service settings.     

Contracts,Negotiation, and Learning: An Examination of Termination Provisions

Taking a temporal view of learning in partnerships, we argue that learning to contract from prior relationships can be manifested not only in an increase in the level of contractual detail but also in a decrease in negotiation time for a given level of contractual detail. We analyse the influence that the length of prior relationships and the detail of termination provisions have on negotiation time, or the time period that it takes for partners to reach a mutually acceptable agreement. We find that: (1) the length of prior relationships has a curvilinear, U‐shaped effect on negotiation time, suggesting the possibility of diverse learning mechanisms as the relationship unfolds; (2) the impact of the detail of termination provisions on negotiation time varies across different types of termination provisions; and (3) it takes a shorter time to negotiate certain types of termination provisions when partners have longer prior relationships. Beyond suggesting the need to investigate the consequences of contractual provisions for collaborators, our study proposes negotiation time as an additional indicator of a learning‐to‐contract effect that complements existing ones.     

Separating contract from governance

This paper contends that there is an important distinction between governance structure and contractual form, and that organizational boundaries, defined by governance structures, need not explain contractual form. The basic idea is that governance refers to the general environments and instruments that structure and ‘govern’ specific terms of trade negotiated in ‘contracts’. Problems of verifiability and observability of contractual performance are hypothesized to drive the differential effects on governance structure and contractual form. Specifically, transaction cost factors known to result in employment as a general governance structure do not automatically result in contracts characterized by the payment of fixed‐wages. Instead, incentive pay and the delegation of decision‐making authority to workers may be preferred by firm owners. The paper proposes that the relationship between a firm and a worker involves a two part decision‐making framework in which one choice is the type of governance that structures the second choice regarding the specific characteristics of the contract linking the worker to the firm. Copyright © 2000 John Wiley & Sons, Ltd.     

A relational view of climate adaptation in the private sector: How do value chain interactions shape business perceptions of climate risk and adaptive behaviours?

Studies exploring climate change adaptation in the private sector have seldom investigated the effect of business network interactions on climate vulnerability and adaptation outcomes. This paper proposes a novel theoretical framework to explore how business–network dynamics affect risk perceptions and adaptive behaviours in business firms. The framework is empirically grounded in a comparative analysis of business–network dynamics from three agricultural value chains in Jamaica that are vulnerable to climate change impacts. The results illustrate how the exposure, sensitivity, and adaptive capacity of value chain actors are influenced by business interdependencies and interfirm relationships. We find that the level of formality of business exchanges (contractual or noncontractual), the level of resource interdependency, and the ability to diversify access channels to critical resources can influence the propagation of climate‐related risks and influence actors' exposure and sensitivity to those risks. The study also offers evidence of the role played by bonding and bridging relational ties on adaptive capacity. The framework and findings provide a foundation for a new research agenda exploring a relational view of firm adaptation strategy in response to climate risks.     

Exploring justice judgment patterns in Asia: a four country multi-group latent class analysis

We explore workers’ justice judgment patterns to understand how they use information to assess fair treatment at work. Justice judgment patterns are the unique set of information that individuals draw upon and use when evaluating the overall fairness of an entity. Data from four samples of workers from Malaysia, Cambodia, the Philippines, and China were analyzed using a multi-group latent class analysis. Results suggest four classes of justice judgment processes, three of which represent different patterns of heuristic processing. Comprehensive processors use a wide range of information when making justice judgments, while minimalist processors consider a limited range of information. Reward-focused processors focus on distributive justice cues and treatment-focused processors specifically attend to interpersonal justice cues while neglecting distributive justice cues. The latent class structure shared conceptual meaning across countries but the patterns had different rates of representation. Findings suggest that individuals do not always use complete information when assessing how fairly they are treated at work. Many appear to use heuristics that emphasize minimizing information processing, instrumental outcomes, or more relational outcomes. Results and implications are discussed.     

Antecedents of concession bargaining in the Great Recession: evidence from Ireland

Concession or ‘give back’ bargaining involves firms seeking changes in pay and conditions of employment from trade unions in return for pledges of enhanced job security and sometimes other forms of reciprocation. Several distinct modes of concession bargaining are distinguishable in the literature, and three modes of concession bargaining have been identified in Ireland during the Great Recession: integrative, distributive and minimal engagement. Deploying qualitatively informed quantitative data on the conduct of collective bargaining during the Great Recession, this article examines a series of antecedent influences on the choices firms make in conducting concession bargaining with unions.     

A multicriteria decision framework for governance of PPP projects towards sustainable development

The lack of a suitable decision framework for the governance of public-private partnership (PPP) projects in Africa, especially Ghana, is a major setback to project success, retarding sustainable development. This study develops a hierarchical decision framework for prioritizing project governance factors and their relationships using the Decision Making Trial and Evaluation Laboratory (DEMATEL) method. We employ 30 experts to evaluate two main PPP governance factors and eleven subfactors. We found that contractual governance factors of PPP are more prominent than noncontractual ones for sustainable PPP projects. However, noncontractual governance factors have the highest net effect on contractual factors. Again, policy diffusion is the contractual factor with the highest net effect, while best practice team norm is the noncontractual factor with the highest net effect. Additionally, effective risk allocation is the most prominent contractual subfactor of PPP, while effective communication of project information is the most prominent noncontractual governance factor. The results imply that PPP project managers should improve governance factors for the sustainable development of PPP projects in Africa. However, they should emphasize the prominent and high net effect governance factors but not wholly disregard the less prominent ones.     

Coping with functional collective action dilemma: functional fragmentation and administrative integration

ABSTRACT

Functional fragmentation among city departments has been a critical public administration problem in practice and theory. This paper investigates the political and administrative motivations for the reform from functionally fragmented water governance model towards an integrative agency design. Drawing on the Institutional Collective Action (ICA) framework and the literature on bureaucratic structures, we hypothesize that cities’ decisions for administrative reform are influenced by different types of transactions costs incurred in the negotiation process among local agencies. Empirical results of this study provide strong support for the transaction cost hypotheses on the roles of bargaining cost, enforcement cost, and information cost.     

Affordances for practice

This paper argues that Gibson's concept of affordance inserts a powerful conceptual lens for the study of sociomateriality as enacted in contemporary organizational practices. Our objective in this paper is to develop a comprehensive view of affordances that builds upon the existing conceptualizations in the psychology, human–computer interaction, sociology and information systems literatures and extend them in three important ways. First, we show that taking an integrative interpretation of affordance as dispositional and relational, rather than the standard unidimensional interpretation, provides a theoretical articulation of how the material and the social influence each other. Second, we propose to broaden the focus from the affordances of technology to the affordances for practice provided jointly by technology and organizing. This means considering social affordances alongside technological affordances. Finally, we argue that the best way to integrate the study of social and technological affordances is not to stretch Gibson's original concept to include the social but rather to complement it with a sociological concept that fits it neatly: Bourdieu's idea of habitus. Our claim is that the concepts of affordance and habitus complement and complete each other. Affordance offers a useful way of thinking about how practice is patterned by the social and physical construction of technology and the material environment and habitus offers a useful way of thinking about how practice is patterned by social and symbolic structures. We describe how affordances and habitus may be used together to provide a theoretical apparatus to study practice as a sociomaterial entanglement, thus adding to the methodological toolkit of scholars embracing a sociomaterial perspectives.     

Individual employee voice: renegotiation and performance management in public services

Periodically, the ‘zone of acceptance’ within which management may use its authority to direct employees' work needs to be adapted to the changing needs of organizations. This paper focuses especially on the non-codified elements of employees' work, such as those commonly the subject of ‘psychological contracts’, and considers the role of individual employee voice in the process of adaptation, and how it relates to more familiar forms of collective employee voice. It is argued that the process can be analysed as a form of integrative bargaining, and applies the framework from Walton and McKersie. Employee voice enters into this process by virtue of consideration of the respective goals and preferences of both parties. The element of employee voice may be very weak when new work goals and priorities are imposed unilaterally by management, and they may be strong when full consideration is given to the changing needs of both parties. Two examples from work on performance management in the public services are used to illustrate these processes. The paper concludes with a discussion of the ways in which collective employee voice may help to reinforce individual-level integrative negotiation. The paper seeks to contribute to the recent work on why employers choose employee voice mechanisms by broadening the range of policies that should be taken into account, and in particular looking at the potential of performance management as one such form.     

Business conditions, shared resources and integrative practices in the supply chain

Integration is one of the important concepts in supply chain management. Both in theoretical and empirical contributions, it is shown that integrative practices improve supply chain performance. Our knowledge with respect to which integrative practices are appropriate under different circumstances is limited. This paper develops propositions regarding the influence of business conditions and the type of resources on integrative practices in links between buyers and suppliers. We will study nine business units and the relationship with their key buyers. For each unit, we will investigate the business conditions, the employment of resources for key buyers and the type and level of integrative practices. Higher complexity in business conditions requires higher levels of integration (specifically in the areas of planning and organisation), which are stimulated by buyer-focused resources and restricted by shared resources. In case of lower complexity, we find lower levels of integrative practices. Here, the influence of shared resources on integration is limited.