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

Abstract

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.

Contract functions in service exchange governance: evidence from logistics outsourcing

“…under which conditions) relational mechanisms and formal contractual provisions complement or substitute each other to effectively govern exchnages, an issue that has recently attracted attention (see Cao and Lumineau 2015;Schepker et al 2014;Weber, Mayer and Wu 2009). The study demonstrates how formal contracts can perform a codification, coordination or adaptation function under different levels of perceived uncertainty and relational experience.…”

“…The paper adds insights by extending its analysis beyond the safeguarding function, and stressing also how contracts can be used to coordinate and adapt service exchanges in the face of service complexity and associated uncertainty. Third, the study contributes to the governance literature which has recently turned its attention to specific conditions (when) affecting the interplay of contractual and relational mechanisms (Cao and Lumineau 2015). It does so by offering insights into how specific contractual provisions that perform codification, coordination and adaptation functions interact with collaboration and trust, under different levels of perceived uncertainty and relational experience.…”

“…Existing research, nonetheless, provides scant empirical insights into when (i.e. under which conditions) contracts perform safeguarding, coordination and adaptation functions in ways that reinforce relational mechanisms, and how (see Cao and Lumineau 2015;Schepker et al 2014). …”

“…Effective governance of customer-logistics service provider (LSP) exchanges is important for achieving cost reduction and improved performance benefits (Solakivi, Töyli, and Ojala 2013;Chen, Goan and Huang 2011;Jayaram and Tan 2010), and formal contracts play a key part in managing exchange relations (Cao and Lumineau 2015). Consider the example of the UK National Health Service (NHS) outsourcing the procurement, storage and distribution of hospital supplies to DHL Supply Chain Ltd.…”

“…Collectively this research stream remains divided over the role of formal contracts in logistics outsourcing governance reflecting also trends in the broader governance literature (Cao and Lumineau 2015;Vandaele et al 2007;Klein-Woolthuis, Hillebrand, and Nooteboom 2005). Detailed contracts are either perceived as signals of lack of trust (Lambert et al 1999), or complements to trust, commitment, flexibility and relational norms to ensure exchange effectiveness (Hofenk et al 2011;Boyson et al 1999).…”