Acknowledgments: The authors want to thank Jason Miller from The Ohio State University for his support in the analysis phase of this research project and the Kühne-Foundation for its generous funding that made this research possible.
The Interplay of Relational Governance and Formal Control in Horizontal Alliances: A Social Contract Perspective
Article first published online: 28 MAR 2014
© 2014 Institute for Supply Management, Inc.
Journal of Supply Chain Management
Volume 50, Issue 2, pages 41–58, April 2014
How to Cite
Wallenburg, C. M. and Schäffler, T. (2014), The Interplay of Relational Governance and Formal Control in Horizontal Alliances: A Social Contract Perspective. Journal of Supply Chain Management, 50: 41–58. doi: 10.1111/jscm.12041
- Issue published online: 28 MAR 2014
- Article first published online: 28 MAR 2014
- Accepted manuscript online: 5 DEC 2013 01:32PM EST
- partnering (alliances);
- performance measurement;
- social contract theory;
- relational governance;
- structural equation modeling
Governance is critical to an alliance relationship as it aids in curbing opportunism and thus in achieving higher performance. While research suggests relational governance as well as formal control mechanisms as viable means to reduce opportunistic behavior in an alliance relationship, the effectiveness of the interplay of these governance forms remains an important issue. This research addresses this challenge by applying social contract theory to resolve the uncertainties surrounding whether relational governance, exercised by joint actions in the performance measurement process (PMP), can be effectively complemented by the formal control mechanisms of output and process controls. Based on a survey of 197 horizontal alliances of German logistics service providers and using structural equation modeling, we find that if formal control mechanisms are legitimized by underlying agreements, which are established through relational governance (i.e., joint actions), the two governance forms indeed complement each other. However, if no such legitimization through social contracts is present, the complementation is counterproductive. Furthermore, it is shown that opportunism in the setting of horizontal alliances is also detrimental to alliance success.