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

Abstract

a b s t r a c tInter-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 interorganizational 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.

Governance of supplier collaboration in technologically uncertain NPD projects

“…Particularly transaction cost economics (TCE) addresses the governance of activities and transactions across firm boundaries (Jagdev & Thoben 2001). In this context, governance refers to the mechanisms that are used for coordination and control of exchanges (Mahapatra, et al 2010). The use of TCE theory is common in the field of marketing and the theory is mainly used to explain why firms choose certain modes of governance to handle transactions (David & Han 2004;John & Reve 2010;Williamson & Ghani 2012).…”

“…Relational governance often results in close relationships and the establishment of social norms. These can be used as a means of safeguarding specific investments and adapting to uncertainty (Heide & John 1990;Mahapatra, et al 2010). In contrast to contracts, relational governance takes time to establish.…”

“…For instance, when complex and innovative products are developed, it may be difficult to formulate complete contracts. Yet, the risks related to information asymmetry (when the supplier knows more than the customer), asset obsolescence (when specific investments are made), and switching costs to shift business to alternative suppliers are high (Mahapatra, et al 2010). In these situations, the role of relational governance as a complement and/or substitute for transactional governance increases (Arranz and de Arroyabe 2012;Cannon, et al 2000;Zhou, et al 2008).…”

“…Previous experiences in the cable and hybrid projects may have created relational norms and trust that are helpful in dealing with the safeguarding problem (Heide & John 1990;Mahapatra, et al 2010). In these projects the firms tended to put less effort into transactional governance mechanisms, particularly into contracts (Yu, et al 2006).…”

How does firm innovativeness enable supply chain resilience? The moderating role of supply uncertainty and interdependence

“…Interdependence is inextricably intertwined with commitment (Geyskens, Steenkamp et al 1996), collaboration, collective utilization of resources, and cross-pollination of practices (Borgatti and Foster 2003) that are all conducive to higher realization and leverage of innovations (Mahapatra, Narasimhan et al 2010). Innovative behavior of one actor is more likely to be adopted by supply chain partners with high interdependence and strong structural and relational embeddedness (Mahapatra, Narasimhan et al 2010). For example, new environmental practices are argued to be diffused at higher degrees in networks with high structural and behavioral embeddedness (Tate, Ellram et al 2013).…”