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 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.     

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.     

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.     

Governance, Negotiations, and Alliance Dynamics: Explaining the Evolution of Relational Practice

This paper explores relational practice in strategic alliances. Focusing on how governance mechanisms and negotiation strategies evolve and form patterns of interaction that are under influence of both recursive and adaptive forces, four modes of relational practice are discussed: recursively integrative, recursively distributive, adaptive toward integrative, and adaptive toward distributive. Three longitudinal cases are examined. I find that different contractual conditions enable (or restrain) interaction patterns. Negotiation behaviour, in turn, affects future contractual conditions and their combination and recombination form the evolution of relational practice. As relationships progress, initial governance mechanisms are complemented and negotiation behaviours change. I explain how perceptions of both process and relational outcomes influence relational practice. In addition, I explicate why relational practices have both recursive and adaptive characteristics, and identify conditions that cause relational practices to move towards more integrative or distributive modes.     

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.     

THE ORGANIZATION OF INNOVATION IN THE UNITED STATES AND JAPAN: NEOCLASSICAL AND RELATIONAL CONTRACTING*

This article discusses the role of intermediate governance structures between vertically related industries in the specific context of technological innovation. In the United States, relations between firms in vertically related industries correspond closely to the neoclassical contracting model, characterized by arms-length, spot contracting on the open market. In Japan, inter-firm relations are more likely to involve relational contracting, characterized by stable bonding mechanisms and a dense historical network of economic ties between the parties to the exchange. We focus upon the kinyu keiretsu type of relational contracting between firms of unequal size and power in vertically related industries, which is a special case of the more generally studied kigyo shudan, or inter-market financial group. For illustrative purposes, we compare the contractual arrangements used to manage the development of new technology by 46 US and 27 Japanese semiconductor equipment firms. We conclude by speculating that the organization of innovation in the Japanese semiconductor equipment industry has accelerated their development of new technology and led to their extraordinarily rapid worldwide market penetration.     

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.     

Governance of complex procurements in the oil and gas industry

This study focuses on the use of contracts and governance mechanisms for handling complex procurements involving several actors. We develop a contractual framework arguing that different combinations of incentives, authority and trust should be used to govern such procurements. The framework is applied to two complex procurement cases in the Norwegian oil and gas industry. The empirical findings show that incentives, authority and trust complement each other, and furthermore, that there is a complex interplay between the specific uses of the different mechanisms. We denote this interplay a multiplier effect. Multiplier effects have not previously been addressed in the literature, and this study contributes to our knowledge about inter-firm governance by showing that governance mechanisms affect each other. Proper use of one mechanism improves the use of other mechanisms, while inadequate use of one mechanism hampers the use of other mechanisms.     

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.     

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.     

Inter-firm governance and structural power in industrial relationships: the moderating effect of bargaining power on the contractual safeguarding of specific assets

In the basic model of transaction cost analysis (TCA), neither market power nor power based on resource-dependence plays a significant role. In this article, we extend the TCA-perspective by combining resource-dependence theory (RDT) and TCA, and examine whether the buyer's bargaining power influences the alignment of the contractual safeguarding of buyer-specific and supplier-specific investments. Data from a survey of 160 industrial purchasing relationships provide empirical support for our theoretical predictions.The empirical findings demonstrate that the buyer's bargaining power does interfere with the safeguarding of relations-specific assets. As the buyer's relative bargaining power increases, the safeguarding of buyer-specific assets is substantially reinforced. On the other hand, the contractual protection of supplier-specific assets is significantly relaxed as the buyer's bargaining power grows.Our findings indicate that there is a tension between the alignment of contractual safeguarding arrangements and structural power in inter-firm business, and that resource-dependence considerations offer an important complement to TCA when we consider the transacting parties’ ability to provide contractual safeguards for assets at risk.Further, the findings indicate that the establishment of relational ties in long-term relationships is an important antecedent to governance structure. The empirical findings demonstrate that the longer a business-to-business relationship lasts, the more the contractual governance is relaxed.     

Contract Law and the Governance of Inter‐Firm Technology Partnerships – An Analysis of Different Modes of Partnering and Their Contractual Implications*

abstract This paper studies some major legal implications of inter‐firm technology partnering through equity joint ventures, non‐equity partnerships, and licensing contracts. These different partnerships are placed within the classical and relational contracting perspectives, while also considering intellectual property rights issues. Samples of contracts of partnerships in bioscience, fine chemicals, biotechnology and biopharmaceuticals are analysed, in detail, with reference to the distribution of property rights, major contractual clauses, and measures for conflict resolution. Equity joint ventures and non‐equity partnerships are found to largely follow a relational contracting perspective, while licensing contracts are governed by a classical contracting perspective.     

Governing buyer–supplier relationships through transactional and relational mechanisms: Evidence from China

Building on economic and social exchange theories, this study investigates the different roles transactional and relational mechanisms have in hindering opportunism and improving relationship performance in an emerging economy. Our study applied to manufacturer–distributor dyads in China and used matched survey data (225 paired sample firms) to test our hypotheses. Our hierarchical multivariate regression and semipartial correlation analyses suggest that transactional mechanisms are more effective in restraining opportunism while relational mechanisms are more powerful in improving relationship performance. This performance is improved more significantly when both contracts and relational norms are used jointly than when used separately. Likewise, opportunism is curbed more effectively when both contracts and trust are used jointly than when used individually.     

Determinants of contractual restraints in franchise contracting

Although an efficient design of franchise contracts requires from the franchisor to choose a bundle of contractual restraints as safeguarding and control mechanism, previous research has not explored the antecedents of contractual restraints as a bundle of contractual clauses. To address this gap, the aim of this study is to explain the determinants of the most important contractual restraints (i.e., exclusive dealing, exclusive territory, tying, resale price maintenance, call option, leasing, alienation, and noncompetition clauses), using transaction cost and relational governance reasoning. The regression results based on primary data from German and Swiss franchise systems provide support of hypotheses.     

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.     

Bridging the cultural divide: Trust formation in university–industry research collaborations in the US,Japan, and South Korea

Academia and industry increasingly work together, but this is not always an easy endeavor. In this article we investigate how relational mechanisms facilitate trust formation in university–industry research collaborations (UICs) in three countries and contribute to the understanding of international similarities and differences in UICs by considering institutional factors, specifically, the strength and maturity of UICs in each country. Analyzing survey data of 618 recent UICs in the US, Japan, and South Korea, we identify the activities of innovation champions as a critical trust building mechanism between firms and universities that complements initial trust formation through tie strength, partner reputation, and contractual safeguards. We find that partner reputation and champion behavior are more important for trust formation in South Korea than in the US and Japan, indicating that in ‘emerging UIC countries’ where most firms and universities have little collaboration experience, reputation and the leadership by innovation champions are more important for trust formation in UICs than in ‘advanced UIC countries’ with strong and mature UIC networks. From a public policy perspective, our findings suggest that networks between firms and universities should be generally strengthened and collaboration partners should be provided with effective contractual safeguards to enhance trust formation in UICs.     

公司治理、契约安排与税务筹划

在委托代理分析框架下,税务筹划作为一种理财行为,不可避免地受到契约安排和公司治理的制约和影响。本文从公司治理、契约安排角度深入分析了税务筹划的治理机制与供给机制,提出了诱导性契约安排与激励相结合的公司治理模式,设计了履约成本最低化的契约安排模型,为税务筹划治理效率的提高奠定了基础。     

Examining the Conditional Limits of Relational Governance: Specialized Assets,Performance Ambiguity,and Long‐Standing Ties

abstract Despite recognition of the benefits of relational governance in inter‐organizational exchanges, factors that may erode its value have received little examination. We extend the literature by asking whether self‐interested opportunities and long‐standing ties erode the positive association between relational governance and performance. Consistent with transaction cost and moral hazard logics, exchange hazards, particularly asset specificity and difficult performance measurement, dampen the positive association of relational governance and performance. We further find, consistent with recent inquiries into the dark side of embedded ties that the performance benefits associated with relational governance decline when parties rely on repeated partnerships.     

Delivering Flagship Projects in an Era of Regulatory Capitalism: State‐led Privatization and the London Olympics 2012

Much of the urban studies literature on the London Olympics has focused on its social legacies and the top‐down nature of policy agendas. This article explores one element that has been less well covered — the contractual dynamics and delivery networks that have shaped infrastructure provision. Drawing on interviews and freedom of information requests, this article explores the mechanisms involved in the project's delivery and their implications for broader understandings of urban politics and policymaking. It assesses contemporary writings on regulatory capitalism, public–private networks and new contractual spaces to frame the empirical discussion. This article argues that the London Olympic model has been characterized by the prioritization of delivery over representative democracy. Democratic imperatives, such as those around sustainability and employment rights, have been institutionally re‐placed and converted into contractual requirements on firms. This form of state‐led privatization of the development process represents a new, and for some, potentially more effective mode of governance than those offered by traditional systems of regulation and management.