Choice and performance of governance mechanisms: Matching contractual and relational governance to sources of asset specificity
AbstractWe argue that the optimal configuration of contractual and relational governance mechanisms in an alliance is contingent not only on the amount of asset specificity, but on the nature of the asset involved in the alliance. Physical assets are more suited to contractual controls, while knowledge assets will be best suited to the use of relational governance mechanisms. Using data on alliances in the German telecommunications industry, we find that the choice of governance mechanisms is as hypothesized. In addition, relational and contractual governance mechanisms are perceived to perform better in the presence of knowledge and physical assets, respectively. Relational governance mechanisms improve overall alliance performance to the degree that knowledge assets are involved, but impair performance when property assets are involved. Our findings contribute to the literature on alliances, as well as the underlying literatures of transaction cost economics, the literature on relational governance, and recent work studying their interaction.
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Bibliographic InfoPaper provided by EconWPA in its series Industrial Organization with number 0411008.
Length: 41 pages
Date of creation: 17 Nov 2004
Date of revision:
Note: Type of Document - pdf; pages: 41
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Alliances; contractual governance mechanisms; relational governance mechanisms; asset specificity; telecommunications;
Other versions of this item:
- Hoetker, Glenn & Mellewigt, Thomas, 2004. "Choice and Performance of Governance Mechanisms: Matching Contractual and Relational Governance to Sources of Asset Specificity," Working Papers 04-0118, University of Illinois at Urbana-Champaign, College of Business.
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
- L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-11-22 (All new papers)
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