The Effect of Institutional Forces on Interfirm Governance Mechanisms and Exchange Outcomes

Description

This study intends to build a conceptual model by extending institutional theory into interfirm governance mechanisms in manufacturer-supplier relationships. Institutions are humanly devised constraints, such as both formal rules and informal constraints, which affect interfirm relationships. We are particularly interested in two prominent institutions in China, namely, legally-based and guanxi-guanxi institutions. We argue that the effectiveness of the two governance mechanisms, i. e., customized contract and relational governance, is subject to the influence of the two institutions. We also examine the three elements of relational governance, namely, information sharing, flexibility, and solidarity, and their effects on contract and exchange outcomes. We will test our hypotheses using an empirical study of manufacturing firms located in China. Overall, our study will provide new insights into the interjection of institutional forces and strategic governance responses in management of buyer-supplier relationships.