Governing Interorganizational Relationships: Balancing Formal Governance Mechanisms and Trust

By Mellewigt, Thomas; Hoetker, Glenn et al. | Management Revue, January 1, 2006 | Go to article overview

Governing Interorganizational Relationships: Balancing Formal Governance Mechanisms and Trust


Mellewigt, Thomas, Hoetker, Glenn, Weibel, Antoinette, Management Revue


Editorial

Alliances allow firms to "pool imperfectly tradable resources in order to gain greater efficiency in the use of existing resources as well as opportunities to create new resources" (Dussauge/Garrette/Mitchell 2000: 207). Not surprisingly, firms often engage in interorganizational relationships as a means of solving complex problems. Indeed, the formation rate of interorganizational relationships has increased dramatically in recent years. Accompanying the increasing number of relationships has been a dramatic increase in their variety and the means by which they are governed. This special issue aims at exploring firms' investment decisions related to alliances as well as the design and management of collaborative agreements.

To be successful, a relationship must accomplish two goals, namely identifying the optimal combination of productive knowledge across parties and mitigating the risks of opportunistic behavior (Mitchell/Dussauge/Garrette 2002; Nickerson/Zenger 2004). The performance of the alliance thus depends critically on the selection of appropriate governing and coordinating mechanisms. Work drawing primarily on transaction cost economics has argued that increases in exchange hazards will lead to the greater use of formal governance mechanisms (Mayer/Argyres 2004; Williamson 1991). At the same time, a parallel literature has put its focus on more relational governance mechanisms based largely on trust and social identification, e.g., establishing teams, frequent direct managerial contact, shared decision making and joint problem solving (Gulati 1998; Uzzi 1997).

The appropriate balance of formal and relational governance mechanisms in managing relationships is the topic of considerable ongoing research. This special issue contributes to this research stream by exploring a set of innovative ideas on the management of interorganizational relationships. Each of the four articles collected in this issue puts a special focus on governance mechanisms and factors which may determine the monitoring and coordination of these relationships. They reflect the actual variety of interorganizational relationships, because this issue includes papers on explorative R&D alliances, asymmetric alliances and relationships between industrial buyers and suppliers. The articles also illustrate the theoretical and methodological variety in this field.

The issue starts with a conceptual paper by Dries Faems, Maddy Janssens, René Boitwen and Bart Van Looy focusing on the governance of explorative R&D alliances. Alliances are a useful tool to share the costs associated with the exploration of new technologies and increasingly gain importance in practice. In contrast to exploitation alliances which are mainly entered in order to jointly utilize complementary resources, explorative alliances imply a partnership between otherwise independent firms in order to jointly experiment and discover new technological opportunities. Hence, the latter involve more risk taking than exploitation alliances. The governance of explorative R&D alliances has been relatively neglected, especially in awareness of the risks that collaborating firms are facing, namely opportunism and coordination costs. Drawing on transaction cost economics (TCE) and organization theory (OT) and considering the literature on new product development (NPD), the authors aim at filling this gap and develop two alternative governance strategies which refer to these substantial risks. Based on TCE and OT, the authors argue that formal governance mechanisms hamper opportunism and coordination problems. Conversely, the literature on NPD suggests that formal governance mechanisms impede the exploration of technological opportunities and are hence counter-productive. Consequently, Faems et al. propose an alternative perspective. Drawing on social network theory and the NPD literature they develop two alternative governance strategies: the first one refers to the collaboration with embedded partners, i. …

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