Contractual Governance, Relational Governance, and Firm Performance: The Case of Chinese and Ghanaian and Family Firms

Abstract

Financial performance of firms is a key to long-term survival and profitability. Investors will only invest in firms whose financial performance is creditable; and family businesses are no exception. Perhaps, the performance of family businesses could be attributed to their unique characteristics, which shape their governance. Contractual governance and relational governance are corporate governance structures used to manage the relationships between parties to a transaction and reduce opportunism. Governance models of family firms are often more complex because of the need for two systems (the family and the firm) to interact positively and efficiently despite their different aims, values, institutional structures, etc. In this study, we explore the effects that contractual and relational governance models exert on family firm financial performance, from a survey of 2432 management and non-management employees of family businesses across China and Ghana.

Influence of Relational Norms on User Interests in PPP Projects: Mediating Effect of Project Performance

“…The positive effect on project performance in PPP projects by good relational norms between the public and private sectors has been verified. This finding is consistent with previous studies [40,61,62], which indicate that project performance can also be influenced by relational norms between the public and private sectors, although project performance is stipulated in the concession contracts and is controlled through the implementation of the concession contracts in PPP projects. Contracts are a formal governance mechanism, and relational norms are an informal governance mechanism [81][82][83].…”

“…For H1, many prior studies in the field of business have found that good relational norms have positive effects on performance [40,61,62]. As a result, this study tests H1 to verify the effect of relational norms between the public and private sectors on project performance in PPP projects.…”

“…This is because the public and private sectors can flexibly adjust to changing environmental conditions, can share information to reduce mutual suspicion and conflicts, and can make decisions based on project interests rather than selfinterest [40,48,52,55]. If PPP projects are operated smoothly, it is easy to improve project performance [61,62]. Good project performance is beneficial to providing public facilities and services to users at a good quality and price.…”

“…Moreover, the public and private sectors may be suspicious of each other and make decisions based on self-interest and, thus, have frequent conflicts [48,52,55]. As a consequence, imperfect relational norms between the public and private sectors would result in poor project performance [61,62]. If PPP projects have poor performance, they cannot provide public facilities and services to users at a good quality and reasonable price [34].…”

An examination of SME involvement in public procurement under bid lot sizing

“…Stability is achieved through spelling out responsibilities necessary for the fulfilment of joint goals and penalties for not meeting performance requirements. The presence of contracts allows exchange parties to work as promised and restricting opportunistic behaviours because a breach of the predetermined contracts may impose social sanctions such as a loss of participation in future public procurement contracts (Zhou and Xu, 2012;Addae-Boateng et al, 2015). Besides, relational and contractual governance, SMEs need to have good administrative governance so as to be able to respond to the procurement policy requirements.…”