Factors that Influence the Development of Inter-Organisational Social Capital : An Empirical Investigation into Corporate Governance

This study explores how the effects of 'corporate governance’ exercise in a way that impinges on Inter-organizational Social Capital (IOSC) and performance. We emphasize that corporate governance concentrates the control power necessary to substantiate contract, formalization and targeting mechanisms, whereas trust is known to be an essential governance facilitator of inter-organizational cooperation. This paper compares the different governance approaches to building IOSC by Indigenous Firms and Sino-foreign firms. An examination of a sample of 318 firms in China suggests that IOSC development is influenced by corporate governance differences. Our results show that Sino-foreign firms rely more heavily on contracts to establish strong inter-organizational relationships. In contrast, domestic firms place a lower reliance on contracts to ensure cooperative outputs. The study provides insights into how the interdependence of trust and control factors significantly affects the development of interorganizational social capital.