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Locus of Uncertainty and the Relationship Between Contractual and Relational Governance in Cross-Border Interfirm Relationships

By: Contributor(s): Material type: TextTextDescription: 771-803 pSubject(s): Online resources: In: DEBORAH E. RUPP JOURNAL OF MANAGEMENTSummary: The relationship between contractual and relational arrangements in interorganizational relationships has been subject to an ongoing debate. We propose that in the context of cross-border partnerships, the governance mechanisms can be both substitutes and complements depending upon contingencies posed by uncertainties of two different origins: environmental and behavioral. We argue that environmental uncertainty (i.e., instability and unpredictability of the external environment) drives the formal and relational arrangements into a more substitutive relationship by elevating the adaptation complications in which increasing reliance on either form of governance inhibits the effective operation of the other. Contrastingly, behavioral uncertainty (in the form of inadequate common grounds and shared frameworks among collaborating firms) encumbers the understanding of partner behavior and conduct and drives the governance mechanisms into a more complementary relationship in which contractual and relational mechanisms facilitate the effective operation of each other. Empirical results from 205 cross-border partnerships of large U.S. firms support our theorized relationships.
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Item type Current library Call number Vol info Status Date due Barcode Item holds
Journal Article Journal Article Main Library Vol 43, Issue 2\ 5557180JA6 (Browse shelf(Opens below)) Available 5557180JA6
Journals and Periodicals Journals and Periodicals Main Library On Display JOURNAL/MGT/Vol 43, Issue 3/5557180 (Browse shelf(Opens below)) Vol 43, Issue 3 (03/05/2017) Not for loan 5557180
Total holds: 0

The relationship between contractual and relational arrangements in interorganizational relationships has been subject to an ongoing debate. We propose that in the context of cross-border partnerships, the governance mechanisms can be both substitutes and complements depending upon contingencies posed by uncertainties of two different origins: environmental and behavioral. We argue that environmental uncertainty (i.e., instability and unpredictability of the external environment) drives the formal and relational arrangements into a more substitutive relationship by elevating the adaptation complications in which increasing reliance on either form of governance inhibits the effective operation of the other. Contrastingly, behavioral uncertainty (in the form of inadequate common grounds and shared frameworks among collaborating firms) encumbers the understanding of partner behavior and conduct and drives the governance mechanisms into a more complementary relationship in which contractual and relational mechanisms facilitate the effective operation of each other. Empirical results from 205 cross-border partnerships of large U.S. firms support our theorized relationships.

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