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A Process Model of Complementarity and Substitution of Contractual and Relational Governance in IS Outsourcing

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Abstract

This paper develops a process model of how and why complementarity and substitution form over time between contractual and relational governance in the context of IS outsourcing. Our analysis identifies four distinct process patterns that explain this formation as the outcome of interaction processes between key elements of both contractual and relational governance. These patterns unveil the dynamic nature of complementarity and substitution. In particular, we show that the relationship between contractual and relational governance oscillates between complementarity and substitution. Those oscillations are triggered mainly by three types of contextual events (goal fuzziness, goal conflict, and goal misalignment). Surprisingly, substitution of informal control did not occur as an immediate reaction to external events but emerged as a consequence of preceding complementarity. Thus, our study challenges the prevailing view of an either/or dichotomy of complementarity and substitution by showing that they are causally connected over time.

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... One of the common models of NPM reforms, public-private partnership (PPP) are widely adopted in emerging economies; however, significant issues in the governance of these arrangements have been observed Hodge, Greve & Boardman, 2018). Research on governance of inter-organizational arrangements including PPPs has thrived in recent times with streams of literature examining categorization of governance mechanisms, the interaction between them, adaptation over a period of time and their impact on performance Cao & Lumineau, 2015;Huber et al. 2013;Caniëls & Gelderman, 2010). Though the literature has burgeoned, the modus-operandi of governance adaptation and its linkage with performance is still muted and requires in-depth studies to illuminate the process . ...
... More specifically, there is a lack of a framework explaining the simultaneous adaptation of governance mechanisms, the evolution of the governance mix, and its influence on performance (Schepaker et al., 2014). The paper intends to bridge the gap by building on the existing literature Huber et al. 2013), asking two central questions: what is the process of governance adapation ? What makes governance adaptation effective? ...
... This is due to difficulties in using penalties and enforcing sanctions (Girth, 2014). There are conflicting findings in the literature because modus-operandi of governance adaptation and its linkage with performance is still muted Cao & Lumineau, 2015;Huber et al. 2013;Schepaker et al., 2014). To address this, in the remaining part of this section, we draw from the business studies to review the literature on different phases of governance adaptations 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 -beginning, process, and termination. ...
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Purpose: Controlling partner opportunism in public-private partnership (PPP) requires effective adaptation of governance mechanisms over life-cycle. This paper proposes a process framework of effective governance adaptation for controlling partner opportunism in case of public-private partnership. Design\Methodology\approach: Using in-depth interview data and extensive secondary data, a comparative case analysis of governance adaptation for controlling partner opportunism in two provinces in the ‘National Health Insurance Program’ in India was conducted. The study uses contextual analysis and critical incident technique to identify the opportunistic behaviors and use processing tracing to map the adaptation of governance mechanisms for effective control of partner opportunism. Findings: The paper makes several propositions and proposes a three-stage framework for effective governance adaptation for controlling partner opportunism. The study proposes that governance adaptation begins with the iterative process of discovering governance needs, followed by the dynamic interaction between governance mechanisms shaping the adaptation process. The process ends with two-dimensional alignment - alignment of partner’s goal and alignment of governance mix with governance needs resulting in effective governance. Research Implications: The paper contributes to the existing debates on governance mix and its effectiveness in PPP by proposing two-dimensional alignment for optimal governance adaptation leading to effective PPP governance. Originality/value: Existing research presents contradictory findings about the effectiveness of governance mechanisms to control partner opportunism. The proposed process-view of governance adaptations tries to address this conundrum to some extent.
... Recent findings suggest more complex and dynamic interrelationships between relational and contractual governance than the previously assumed dichotomy of complementarity and substitution . These studies emphasize the role of relationspecific boundary conditions and find that relational and contractual governance mechanisms can act as substitutes (Rai et al., 2012), simultaneously work as substitutes and complements (Lioliou et al., 2014;Tiwana, 2010), or have an impact that oscillates over time (Huber et al., 2013). We extend this stream of the literature by investigating how alignment or congruence between the two governance mechanisms (i.e., both mechanisms are used equally) and misalignment (i.e., incongruence or imbalance in the usage of both mechanisms) influence relationship outcomes. ...
... The effect of alignment between governance modes has received little attention; prior research has mainly addressed how and why client and vendor shift the alignment between governance modes to overcome the weaknesses or use the strengths of a particular mode in response to contextual triggers (Huber et al., 2013;Lioliou et al., 2014). Thus, our study was guided by two main research questions: ...
... Even though governance research has a long tradition in the ITO literature, disagreement reigns as to whether the two governance modes work as substitutes or complements. Substitution effects imply that contractual and relational mechanisms are functional equivalents that replace each other or dampen each other's effectiveness (Huber et al., 2013;Uzzi, 1997). Complementarity relates to effects that compensate (e.g., informal communication offsets the limitations of contractual governance) or enable (e.g., well specified and fair formal agreements lead to more trusting relationships) (Huber et al., 2013;Poppo and Zenger, 2002). ...
Article
Innovation in IT outsourcing, in which client and vendor aim at co-creating strategic innovation, is becoming a key ingredient of contemporary sourcing arrangements. However, innovation in ITO is regarded as being a paradox as innovation's dynamic nature conflicts with established guidelines for successful ITO governance. To date, knowledge about how to accommodate innovation in ITO governance is embryonic. Particularly unclear are the differential and interaction effects of contractual and relational governance mechanisms on relationship learning and joint innovation. To investigate these effects, we propose and validate a research model through survey data from 344 senior-level IT employees of firms that collaborate with a vendor on strategic innovation. Results indicate that while contractual mechanisms primarily determine joint innovation performance, relational mechanisms are central to relationship learning. Results show an inverted U-shaped relationship between governance mechanisms and joint innovation and an additive complementary relationship between governance mechanisms and relationship learning.
... The extant research has discussed the interplay of other organizing principles (e.g., relational and contractual governance, or trust and control) in two ways: how they influence each other and how they jointly influence a particular outcome (see Cao & Lumineau, 2015, for a review). The bulk of these studies have shown that two organizing principles can function as substitutes, i.e., favoring one decreases the benefits of the other and vice versa, and/or as complements, i.e., favoring one increases the benefits of the other and vice versa (Das & Teng, 2001;Edelenbos & Eshuis, 2012;Huber, Fischer, Dibbern, & Hirschheim, 2013;Möllering, 2005;Poppo & Zenger, 2002). Building on this body of research, we explore the mechanisms through which trust and distrust work as organizing principles and the dynamics underlying their interplay. ...
... Next, building on research suggesting that the relationship between two organizing principles can be substitutional and/or complementary (see Cao & Lumineau, 2015), we grouped the identified dynamics into two ways that trust and distrust interplay (our aggregated dimensions in Figure 2). For the complementarity interplay (further illustrated in Figure 3), the dynamics corresponded to previously identified enabling and compensating dynamics (Huber et al., 2013). For the cases of the substitution interplay, we found an undermining dynamic between trust and distrust, where both types of trusting or distrusting mechanisms (behavioral and cognitive) were undermined by the dominance of the other. ...
... In the narratives about specific projects, we noticed that levels of optimism and watchfulness varied depending on the intensity of both the cognitive and behavioral mechanisms of trust and distrust respectively, influencing the interplay between trust and distrust. In line with previous research (Huber et al., 2013), we identified both instances where trust substituted for distrust and vice versa, and instances where trust and distrust were complementary. The substitution was less common and as a result of firms' continued interactions with each other and in the broader network, a shift to complementarity often occurred. ...
Article
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Trust and distrust are two distinct organizing principles that play a critical role in interorganizational projects where highly interdependent organizations collaborate to build tailor-made and technologically complex solutions. Whereas an emerging body of research has debated the conceptual distinction between trust and distrust, this paper emphasizes the processual nature of trusting and distrusting and the interplay between them. Drawing upon insights from project-based collaboration in a complex products and systems industry, we explore the distinct cognitive and behavioral mechanisms through which trust and distrust work and orient firms towards optimism and watchfulness in the interaction. Our findings show that trust and distrust can act both as substitutes and complements through three interconnected dynamics—undermining, enabling, and compensating. These dynamics develop and recursively interrelate through interfirm interactions within single projects and in the broader network. We conclude by presenting our contributions to interorganizational trust literature and by proposing that the interplay of trust and distrust can have both positive and negative effects on the pursuit of project-based relationships.
... Drawing on Wiener and Saunders (2014) and on the idea that formal governance affects norms in inter-firm relationships (Goo et al., 2009;Huber et al., 2014;Macneil, 1980), we argue that bilateral and collective formal governance direct efforts towards different performance dimensions (individual vs. joint), thereby invoking different metaphors (market of vendors vs. team of vendors) and promoting different norms (competitive vs. cooperative). Consequently, although clients may combine bilateral and collective governance to manage different performance dimensions, tensions are likely to arise. ...
... The market character emphasized by strong bilateral governance will affect how vendors interact in such multisourcing arrangements. Indeed, prior research has shown that formal governance shapes norms in inter-organizational exchange relationships (Goo et al., 2009;Huber et al., 2014;Macneil, 1980). Norms are patterns of accepted and expected behavior shared by a group (Goo et al., 2009;Heide & John, 1992). ...
... A key tenet of the outsourcing governance literature is that governance mechanisms generally do not act in isolation, but rather complement or substitute 3 each other (Huber et al., 2014;Poppo & Zenger, 2002 Consequently, while bilateral outcome control is associated with high individual performance, this effect will be weakened in the presence of high amounts of collective outcome control. ...
Article
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While multisourcing offers benefits such as access to best-of-breed resources and enhanced competition, it also presents clients with a new governance challenge, namely the need to ensure that vendors not only deliver their individual contributions but also collaborate to produce a coherent joint outcome. Clients may address this challenge by combining bilateral governance focused on each vendor's individual performance with collective governance aimed at the vendors' joint performance. However, it is unclear how the simultaneous application of bilateral and collective governance affects multisourcing performance. Indeed, the literature falls short in systematically differentiating these governance mechanisms and empirically examining their interplay. Drawing on existing work on multisourcing and on the outsourcing governance literature, we argue that bilateral and collective governance direct efforts towards different performance dimensions (individual vs. joint), invoke different metaphors (market vs. team), and promote conflicting norms (competitive vs. cooperative), which can result in trade-offs when bilateral and collective governance mechanisms are combined. Results from a survey of 189 multisourcing arrangements support our expectation that bilateral and collective governance promote different performance dimensions. Notably, one collective governance mechanism, conflict management procedures, contributes to both individual and joint performance. We find substitutional effects between bilateral and collective governance in relation to joint performance but not individual performance, indicating that the benefits of collective governance for joint performance are more easily compromised than the benefits of bilateral governance for individual performance. We also observe complementary effects within collective governance mechanisms. Our key contribution lies in theorizing and empirically examining the effects and interplay of bilateral and collective governance in multisourcing.
... The previous literature mainly examined this relationship in the context of a stable exchange, neglecting the question of how it would develop when the exchange ran into difficulties. As Huber et al. (2013) concluded, disturbances during the exchange may trigger different relationships between contractual governance and relational governance. This study addresses the gap by examining the relationship after the contract has been violated. ...
... More generally, the one-dimensional view of contract provisions (in terms of contract control) has produced lots of other conflicting results regarding the outcomes of contracts in project management. For example, the relationship between contracts and relational governance is ambiguous between promotion (Zhang et al., 2018a, Benítez-Ávila et al., 2018 and inhibition (Huber et al., 2013). Previous studies have obtained divergent results regarding the effects of contracts on opportunism in terms of suppression (Kadefors, 2004), no significant effects (Lu et al., 2015), or aggravation (Lu et al., 2016b), and the role of contracts in damaging project performance (Sarhan et al., 2017) or improving it (Sekar et al., 2018). ...
... It shows that goodwill trust substitutes (reduces) contractual enforcement, whereas competence trust complements (increases) the severity of contractual enforcement. Disturbances may also trigger different relationships between contractual governance and relational governance (Huber et al., 2013). However, previous literature has mainly examined this relationship in the context of a stable relationship. ...
Article
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Purpose The purpose of this paper is to establish an integrated framework of the antecedents of enforcement after contract violations in construction projects and to examine whether contract provisions (control and coordination provisions) and trust (goodwill and competence trust) affect enforcement mechanisms (contractual enforcement and relational enforcement). Design/methodology/approach A survey method was employed to test the hypotheses. The authors collected data from the Chinese construction industry, and general contractor respondents were asked to answer a questionnaire about a contract violation by one of their subcontractors. Findings Control provisions and competence trust are positively related to contractual enforcement, but goodwill trust is negatively related to contractual enforcement. Relational enforcement is influenced by goodwill trust and competence trust. Research limitations/implications This study treats contract violations as a given variable, and it focuses on contract violations by subcontractors. The cross-sectional design makes it difficult to confirm the causality of the relationships. Practical implications Overly strict contractual enforcement can generate disputes and a vicious cycle of retaliation, and overly severe relational enforcement can damage a potentially profitable long-term relationship. In construction projects, the violating party will benefit from this study to avoid excessively contractual enforcement and relational enforcement, thus developing a more collaborative atmosphere on the current project and even establishing a solid long-term relationship. Originality/value This study extends the project management literature by investigating the antecedents of enforcement after contract violations, an area not yet fully researched.
... However, questions about the either/or dichotomy of substitution versus complementarity stem from empirical evidence of other possible dynamic relationships between trust and control, in which they oscillate between acting as substitutes and complements (Huber et al., 2013;Long and Sitkin, 2018;Vlaar et al., 2007). Indeed, there are a few studies offering a dynamic perspective on trust and control (Gregory et al., 2013;Heiskanen et al., 2008;Smets et al., 2013;Zimmermann et al., 2013;Zimmermann and Ravishankar, 2014). ...
... An external adaptation trigger usually linked to goal fuzziness, goal conflict, or goal misalignment initiates the process. Huber et al. (2013) claimed that contractual and relational governance oscillate between complementarity and substitution, but these oscillations are set in motion by exogenous events or adaptation triggers, not by endogenous variables. Oscillation between trust and control also appears in Heiskanen et al.'s (2008) study. ...
... Besides Huber et al. (2013), all studies cited in Table 3 assume that project goals are static or at least external to the feedback loops between actual performance, trust, and control. In general, this implies that goal seeking is the primary management policy: choosing to maintain the established project goals while being willing to adjust the levels of trust and control to reduce any gaps between project goals and actual performance. ...
... However, questions about the either/or dichotomy of substitution versus complementarity stem from empirical evidence of other possible dynamic relationships between trust and control, in which they oscillate between acting as substitutes and complements (Huber et al., 2013;Long and Sitkin, 2018;Vlaar et al., 2007). Indeed, there are a few studies offering a dynamic perspective on trust and control (Gregory et al., 2013;Heiskanen et al., 2008;Smets et al., 2013;Zimmermann et al., 2013;Zimmermann and Ravishankar, 2014). ...
... An external adaptation trigger usually linked to goal fuzziness, goal conflict, or goal misalignment initiates the process. Huber et al. (2013) claimed that contractual and relational governance oscillate between complementarity and substitution, but these oscillations are set in motion by exogenous events or adaptation triggers, not by endogenous variables. Oscillation between trust and control also appears in Heiskanen et al.'s (2008) study. ...
... Besides Huber et al. (2013), all studies cited in Table 3 assume that project goals are static or at least external to the feedback loops between actual performance, trust, and control. In general, this implies that goal seeking is the primary management policy: choosing to maintain the established project goals while being willing to adjust the levels of trust and control to reduce any gaps between project goals and actual performance. ...
... Recent findings suggest more complex and dynamic interrelationships between relational and contractual governance than the previously assumed dichotomy of complementarity and substitution . These studies emphasize the role of relationspecific boundary conditions and find that relational and contractual governance mechanisms can act as substitutes (Rai et al., 2012), simultaneously work as substitutes and complements (Lioliou et al., 2014;Tiwana, 2010), or have an impact that oscillates over time (Huber et al., 2013). We extend this stream of the literature by investigating how alignment or congruence between the two governance mechanisms (i.e., both mechanisms are used equally) and misalignment (i.e., incongruence or imbalance in the usage of both mechanisms) influence relationship outcomes. ...
... The effect of alignment between governance modes has received little attention; prior research has mainly addressed how and why client and vendor shift the alignment between governance modes to overcome the weaknesses or use the strengths of a particular mode in response to contextual triggers (Huber et al., 2013;Lioliou et al., 2014). Thus, our study was guided by two main research questions: ...
... Even though governance research has a long tradition in the ITO literature, disagreement reigns as to whether the two governance modes work as substitutes or complements. Substitution effects imply that contractual and relational mechanisms are functional equivalents that replace each other or dampen each other's effectiveness (Huber et al., 2013;Uzzi, 1997). Complementarity relates to effects that compensate (e.g., informal communication offsets the limitations of contractual governance) or enable (e.g., well specified and fair formal agreements lead to more trusting relationships) (Huber et al., 2013;Poppo and Zenger, 2002). ...
Article
Innovation in IT outsourcing, in which client and vendor aim at co-creating strategic innovation, is becoming a key ingredient of contemporary sourcing arrangements. However, innovation in ITO is regarded as being a paradox as innovation’s dynamic nature conflicts with established guidelines for successful ITO governance. To date, knowledge about how to accommodate innovation in ITO governance is embryonic. Particularly unclear are the differential and interaction effects of contractual and relational governance mechanisms on relationship learning and joint innovation. To investigate these effects, we propose and validate a research model through survey data from 344 senior-level IT employees of firms that collaborate with a vendor on strategic innovation. Results indicate that while contractual mechanisms primarily determine joint innovation performance, relational mechanisms are central to relationship learning. Results show an inverted U-shaped relationship between governance mechanisms and joint innovation and an additive complementary relationship between governance mechanisms and relationship learning.
... However, most studies have only focused on how the focal firms benefit from their first-order social capital and ignored the influ-introduces the definition of firms' second-order social capital and focuses on the second-order social capital from suppliers and customers Second-order social capital social capital from customers Arfi et al., 2018 ;Brockhoff, 2003 ;Chen & Hung, 2014 ;Feng et al., 2019 ;Lynch et al., 2016 investigates the effect of second-order social capital on green innovation from the perspective of firms. Relational governance and contractual governance focus on the perspective of brokers Galunic et al., 2012 introduces governance ambidexterity, which is a comprehensive governance method focus on only one aspect: relational governance or contractual Abdi & Aulakh, 2017 ;Cao & Lumineau, 2015 ;Claro et al., 2003 ;Cao et al., 2018 ;Ferguson et al., 2005 ;Huber et al., 2013 ;Lioliou et al., 2014 ;Lumineau et al., 2012 ;Lu et al., 2015 ;Poppo & Zenger, 2002 ;Sheng et al., 2018 ;Wacker et al., 2016 ;Zhou & Xu, 2012 investigates the moderating effect of BD and CD on the relationship between second-order social capital of and green innovation ( March, 1991 ). Green exploitative innovation emphasizes the enhancement of existing green knowledge and green technology, improving existing products and services ( Guan and Liu, 2016 ;Yan and Guan, 2018 ). Green exploratory innovation is associated with searching new green knowledge, developing new products and technology ( Bernal P et al., 2019 ;Yan and Guan, 2018 ;Phelps, 2010 ). ...
... However, previous studies have rarely explored the relationship between governance ambidexterity and green innovation ( Sheng et al., 2018 ). Most studies separately discuss the role of relational governance and contractual governance ( Cao et al., 2018 ;Abdi and Aulakh, 2017 ;Lumineau and Henderson, 2012 ;Lu et al., 2015 ;Claro et al., 2003 ;Ferguson et al., 2005 ), or focus on the interplay of relational governance and contractual governance ( Cao and Lumineau, 2015 ;Sheng et al., 2018 ;Hendrikse et al., 2015 ;Huber and Fischer, 2013 ;Lioliou et al., 2014 ). To fill the reaearch gap, this study introduces governance ambidexterity, which can be divided into balanced dimensions (BD) and combined dimensions (CD). ...
... With the relational development, previous experience may be considered in the new contract, thus improving the quality of the new contract ( Lu and Guo, 2015 ). Otherwise, relational governance promotes information exchange, thus facilitating to achieve the goals of contractual governance ( Huber and Fischer, 2013 ). ...
Article
Despite the importance of social capital on green innovation has been recognized, our knowledge of the influence of second-order social capital is still unclear. Based on social exchange theory and transaction cost economics perspective, we develop hypotheses regarding the impacts of second-order social capital on green innovation, as well as the moderating role of governance ambidexterity (i.e., balanced dimension and combined dimension). We use questionnaires to collect data from 212 Chinese firms and conduct hierarchical regression analysis to test hypothesized relationships. The results suggest that second-order social capital from both customers and suppliers have positive effects on green exploitative innovation and exploratory innovation. Balanced dimension strengthens the effect of second-order social capital from customers on green exploratory innovation while weakens the effect of second-order social capital from suppliers on green exploratory innovation. Further, combined dimension strengthens the effect of second-order social capital from suppliers on green exploitative innovation while weakens the effect of second-order social capital from customers on green exploitative innovation. This research enriches the literature on social capital and green innovation.
... A static view of ITO relationships limits our understanding of how these relationships evolve into a spiral, what are the potential mechanisms to reverse this downward spiral and what are the boundary conditions of the reversal mechanisms. Some process-based theories like social and structural governance models (eg, Choudhury & Sabherwal, 2003;Huber, Fischer, Dibbern, & Hirschheim, 2013) capture the complementarity and substitution dynamics of controls in ITO projects. These studies provide a springboard to reach a process model that describes ITO relationship spirals. ...
... Hence we can see that control configuration is dynamic, intertwining with the evolution of shared client-vendor understanding. The complementarity and substitution of contractual and relational governance can be triggered by different adaptation events (such as goal fuzziness, goal conflict and major goal misalignment), which then form into a process of governance over time (Huber et al., 2013). These literature descriptions highlight the necessity to include feedback loops in managing ITO projects and also imply the existence of relationship spirals in the ITO context. ...
... Our literature review indicates a lack of detail in the dynamic management process that covers both subjective and objective measures, sequences and boundary conditions of different mechanisms. Hence, such research gaps and the associated discussions lead to our potential contribution of a synthesised process theory (Huber et al., 2013) and "dynamic theory" (Fang et al., 2018) in the form of an explanatory causal loop model. Our aim was also to bridge the gaps in available remedial mechanisms to reverse the vicious relationship spiral, as explained in the context of an action research project below. ...
Article
Full-text available
IT outsourcing (ITO) remains a popular business practice, but many buyers and suppliers of IT services are caught in a vicious relationship spiral of low trust, bad collaboration and mediocre performance. This paper describes a novel process understanding of how vicious cycles work and suggests a new method for how they can be reversed into virtuous cycles. Based on the action research and complementary system dynamics simulation, this paper demonstrates how an ineffective ITO relationship between a European Harbour Authority and its main IT supplier ITCo was formed and, later, transformed. The method, involving collaborative redesign of service workflows, applied in this action research triggered the reversal of an otherwise downward relationship spiral. Both the empirical facts from the action research data and the system dynamics simulation data are provided as evidence. We conclude the paper with conceptual and methodological contributions as well as scope for future research. K E Y W O R D S action research, collaborative service design (CSD), combined-method approach, IT outsourcing (ITO), relationship dynamics, system dynamics
... 4 Prior studies have not observed the interactive nature of power and the governance mechanism or have merely focused on juggling the two mechanisms. 10,11,15,32,37,50,51,63,88 However, our results specify the conditions necessary for governance complementarity or the combination of the governance mechanism with a particular dimension of ISD performance considering the significant environmental factor of network power. Therefore, we find that the fit between the governance mechanism and network structure is critical in determining ISD performance. ...
... Thereby, we illustrate a novel governance-power fit theory. So far, IOR-governance literature has been inclined to focus on the complementarity or substitutability between two governance mechanisms 4,10,11,15,32,37,45,50,51,63,87,88 thus it has scarcely been approached from the perspective of strategy alignment, with the exception of a few studies addressing the fit between governance and knowledge, 60 governance and service, 43 or system 68 complexity. By proposing a new analytical lens of governance efficiency from the under-tested governance-power fit viewpoint, our study enriches the strategy alignment concept in IOR-governance literature. ...
... Joint history does not, however, linearly translate into trust because exchange partners first need to go through a certain period of ambivalence at the beginning of their relationship. Huber et al. (2013) Contracts and trust (Co) evolutionary interplay ...
... More recently, scholars have argued that contractual and relational mechanisms can actually be both substitutes and complements at different points in time. Huber et al. (2013), for instance, suggested that the relationship between contractual and relational governance oscillates between substitution and complementarity and that contextual events, such as goal misalignment spur those oscillations; meanwhile, Oliveira and Lumineau (2017) showed, in the context of interorganizational project networks, when and how the interplay of different governance mechanisms changes throughout the different relationship phases of the project lifecycle (see also Howard et al. 2019). ...
Article
Full-text available
Existing academic literature has discussed contracts and relational governance as the key mechanisms that help alliance partners address problems of cooperation and coordination. However, when an alliance undergoes disruption, the nature and extent of such problems may change and therefore the value of these mechanisms may change. This study advances a dynamic perspective on alliance governance by examining the impact of disruption and subsequent adjustment on the value of alliance governance mechanisms. To this end, we longitudinally studied a revelatory case of a research and development alliance in the veterinary drug industry that experienced disruption triggered by an internal restructuring at one of the partner companies. We approached the evidence with a fine-grained typology that builds on two dimensions that underlie governance mechanisms: the means to enforce their ruling principles (contractual versus relational) and the level of codification of these principles (formal versus informal). Based on our findings, we (1) show the significance of this revised typology, which suggests that contractual governance is not necessarily formal and relational governance is not necessarily informal; (2) provide a more systematic discussion of the tradeoffs that the various mechanisms entail and how these are altered through disruption and adjustment dynamics; and (3) analyze how the interplay between different types of governance mechanisms evolves following disruption and adjustment. Overall, our study brings the concept of disruption to the dynamic perspective of alliance governance and highlights the contingent value of alliance governance mechanisms.
... Overall, the debate on interplay (i.e., the substitution and complementarity) yields inconclusive scientific outcomes (e.g., Benítez-Ávila et al., 2018). For instance, according to Huber, Fischer, Dibbern, and Hirschheim (2013), the relationship between contractual and relational governance is dynamic and oscillates between complementarity and substitution. Complementarity manifests itself either through enabling (one creates conditions that facilitate the other) or compensating (one compensates for the weaknesses of the other). ...
... Overall, we have detected that IOR governance interplay changes in different phases of OI B2B project collaborations and different types of environments (Cao & Lumineau, 2015;Olander et al., 2010). As the appropriateness of governance proved itself important for both the focal firm and the other ecosystem actors (Carson et al., 2006;Klein-Woolthuis et al., 2005), contractual and relational mechanisms manifest several functionalities and dysfunctionalities that need to be managed in order to ensure successful joint value creation and value capture (Howard et al., 2019;Huber et al., 2013). ...
Article
More and more self-interested businesses are organizing themselves in interdependent, non-hierarchically controlled networks to jointly create superior value by engaging in open innovation projects. In aligning the heterogeneous actors toward a focal value proposition, it is crucial for the orchestrators of such arrangements to manage their inter-organizational relationships by navigating the interplay of contractual and relational governance mechanisms. Despite the relevance of how contracts and relational governance co-evolve, knowledge on the interaction of contracts and relational governance in specific contexts is still missing. Through a multiple-case study of ten multinational ecosystem orchestrators, we explore how large multinational orchestrators govern the interplay inter-organizational relationship mechanisms in open innovation projects across ecosystems. Based on our findings, we propose a five-dimensional, sequential model of governing the interplay of inter-organizational relationship mechanisms in open innovation projects across ecosystems and discuss our contributions in the context of the current literature.
... The first group paid attention to the relationships between the two governance mechanisms. Here, scholars proposed the opposing arguments -substitute relationship (De Reuver and Bouwman 2012; Huber et al. 2013) and complementary relationship (Poppo and Zenger 2002;Schilke and Cook ...
... Here, again, scholars drew different conclusions. Specifically, some researchers found the negative relationship between the joint use of the two governance mechanisms and exchange performance (Chen et al. 2013;Huber et al. 2013;Jiang et al. 2013), while some researchers held the opposite view -the complementary relationship (Huang, Cheng, and Tseng 2014;Poppo and Zenger 2002;Roehrich, Lewis, and Mickey Howard And Dr Nigel Caldwell 2014). Given the fruitful achievements on this topic, some scholars have summarized the relationship between relational and formal governance in recent years (e.g., Cao and Lumineau 2015). ...
Article
Purpose Relational governance has been attracting more and more attention in this century. Current research in relational governance field mainly discusses the impact of relational governance on exchange performance, the interrelation between relational and formal governance, etc. However, the limitation of the existing research in relational governance research subfield is that fewer studies have conducted a review-based study to assess global relational governance research. In other words, an attempt at research looking backward, the status quo, as well as looking forward toward research frontiers and openings for future research on global relational governance is almost nonexistent. To attempt to fill this opening, this study aims to review the global relational governance research from 2000 to 2020 combining quantitative analysis (bibliometric analysis) with qualitative analysis (content analysis). The objective of this study is as follows: 1) to look backward to discern the status quo of relational governance research from 2000 to 2020; and 2) to attempt look forward the research frontiers and opening s for future research; 3) to derive and propose a basic framework in this field. Methodology As a literature review based on the bibliometric methods, it is important to look back at papers which have been published in the past by presenting and analyzing the massive literature data. Furthermore, it is critical to propose trends that are emerging in this research field. That’s to say, both forward looking and backward looking are necessary. Accordingly, we adopted a four-step workflow consisting of data collection, descriptive analysis, quantitative analysis, and qualitative analysis complementing the results of quantitative analysis. That is to say, this paper in lock step manner combines quantitative analysis with qualitative analysis to look backward uncovering status quo of global relational governance research from 2000 to 2020, and to attempt to look identifying research frontiers and openings for future research. Especially, in quantitative analysis section, by using the tool of CitespaceV, we can objectively look backward the research hot topics and look forward research trends and frontiers initially. Subsequently, the qualitative analysis complementing the results of quantitative analysis, aims to further look backward the research topics which are important but ignored in the quantitative analysis and look forward research openings in relational governance research field. By this mean, we can draw a relatively objective and comprehensive conclusion on global relational governance research. Findings Using the data gathered from the WOS core collection database, we looked backward the status quo, and looked forward the research openings on global relational governance research. As for the status quo, the influential countries and institutions, pivotal scholars, key documents, hot topics, research trends, and frontiers were identified. With regard to the journals, Industrial Marketing Management and Journal of Business Research were the most influential journals in relational governance research field. The performance of Journal of Business and Industrial Marketing was also excellent. As for the academic performances of different stakeholders, countries such as England, USA, Spain, Australia, and China made great academic contributions to relational governance research. Institutions consisting of University of London, City University of Hong Kong, University of Hong Kong and University of Wisconsin System had the prominent influence. In term of authors, Laura Poppo and Kevin Zheng Zhou had the prominent impact in this research field. Through document co-citation analysis in quantitative analysis, top 3 literatures in terms of the importance of degree of all the literatures were found. As for research hot topics, ten research topics were identified by the quantitative analysis and qualitative analysis: the integration research combining formal governance with relational governance, the impactful factors of relational governance, the effect of relational governance, the norm and dimension of relational governance, supplier-manufacturer relationships/supply chain management, IT/outsourcing, (complex) projects, China, alliance, and commitment. With regard to research frontiers, three research frontiers including behavior, complementarity, and absorptive capacity were detected by quantitative analysis. Additionally, three stages of relational governance research were concluded by comprehensive induction: the first phase (2002–2008) covering the norm and the effect of relational governance, and the second phase (2009–2013) extending of research scope and objective, and the last phase (2014–2020) representing the research frontiers of relational governance research. Furthermore, three research opening s lacking of investigation and required further research were identified, including concerning how and when relational and formal governance are related, the “dark sides” of the relational governance and the research from the perspective of psychology. Originality The present research is the first that investigates the global relational governance research status quo and offers researchers a comprehensive and deeper understanding in relational governance research field. The findings can offer a more comprehensive and deeper understanding on the research status quo, “hot” topics, research trends and frontiers of global relational governance research from 2000 to 2020 and research opening for future research. Consequently, the present research represents a contribution in business marketing theory development and inter-organizational relationship management.
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... The compensating mechanism (Huber et al., 2013) assumes that there are limits to both contractual and relational governance, but the application of one can compensate for the limits of the other. Scholars largely demonstrate that trust gives collaborating parties the confidence needed to learn from mistakes, accept short-term loss for the sake of long-term gain (Cao and Lumineau, 2015;Paiva et al., 2014;Zhang and Huo, 2013). ...
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... Overall, two streams of scholars hold opposing views. Whereas one group of scholars treats contractual governance as a substitute to relational governance, i.e., the deployment of contractual governance reduces the use of relational governance, or vice versa (e.g., Huber, Fischer, Dibbern, & Hirschheim, 2013;Li, Xie, Teo, & Peng, 2010), another group of scholars finds to the contrary that they complement each other, i.e., the deployment of contractual governance enhance the use of relational governance, or vice versa (e.g., Liu, Luo, & Liu, 2009;Poppo & Zenger, 2002). In particular, Zheng, Roehrich, and Lewis (2008) maintained that the dynamic interplay between the two governance mechanisms follows no consistent patterns. ...
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Small- and medium-sized enterprises (SMEs) establish asymmetric research and development (R&D) alliance with core enterprises to improve innovation efficiency. Unfortunately, the gap in the status and bargaining power between enterprises in such partnerships makes the intellectual property risk situation complicated. While gaining support and assistance from core enterprises, SMEs face the risk of exposing their core knowledge and key resources, which seriously affects the stability of R&D alliance and the sustainability of cooperative innovation. How to protect the intellectual property rights of SMEs in the asymmetric R&D alliance and improve the alliance’s stability is an urgent problem to be solved. Based on the theory of resource dependence and transaction cost, this study uses 260 high-tech companies participating in the asymmetric R&D alliance as a sample to conduct empirical research from the perspective of SMEs in a weak position. The purpose of this study is to sort out the types of intellectual property risks in the alliance and clarify the relationship between them and the stability of asymmetric R&D alliance. Furthermore, this study examines the moderating effects of contract governance mechanisms and relational contracts to explore effective governance mechanisms at the alliance level. Empirical results show that the intellectual property investment risk and the intellectual property loss risk have a significant negative impact on the stability of asymmetric R&D alliance. The contract governance mechanism negatively moderates the impact of intellectual property investment risk on the stability of the asymmetric R&D alliance. The relationship governance mechanism negatively moderates the impact of intellectual property loss risk on the stability of the asymmetric R&D alliance. The contract and relationship governance mechanism jointly negatively moderate the impact of intellectual property investment risk and loss risk on the stability of the asymmetric R&D alliance. 1. Introduction Small- and medium-sized enterprises (SMEs) are more likely to encounter issues regarding limited innovation resources than core enterprises. When facing market pressure, they will seek to establish research and development (R&D) partnerships with core enterprises in the industry to obtain complementary innovation resources. In this cooperative relationship, SMEs are relatively dependent on the resources of the core enterprise, leading to the unequal status of the two parties in the cooperative relationship, thus forming an asymmetric R&D alliance [1]. Although the asymmetric R&D alliance can bring substantial potential benefits to both partners, the failure rate of this alliance form is over 60%, and the asymmetric R&D alliance is precarious [2, 3]. However, scholarly attention has not yet turned to the field of asymmetric alliance but has focused on symmetric alliance [4, 5]. Some scholars are aware of the universality and importance of asymmetric alliance but still pay more attention to dominant core enterprises [6, 7]. In fact, in asymmetric alliance, SMEs face the risk of exposing their core knowledge and key resources while obtaining the support and help from core enterprises [8], that is, facing the ‘border confusion’. If SMEs can effectively and appropriately protect their key resources from infringement, they can obtain new technological achievements and competitive advantages through cooperative R&D with core enterprises; otherwise, they will lose core knowledge and existing benefits. Furthermore, given the lower bargaining power of SMEs in asymmetric alliance, core enterprises can use their dominant position to exercise opportunistic behavior to make profits. Therefore, in the asymmetric R&D alliance, SMEs face greater intellectual property risks [9]. This long-term asymmetric dependency relationship leads to unequal risk and inconsistent benefit distribution among R&D alliance members, thus exacerbating conflicts among members and leading to the breakdown of alliance relationships [10]. Therefore, a huge challenge is knowing how weak enterprises can obtain actual and long-term benefits in asymmetric R&D partnerships while protecting their key knowledge and interests from illegal encroachment by strong enterprises and maintaining the stability of asymmetric R&D alliance. Constructing an effective alliance governance mechanism at the alliance level is necessary to protect the core intellectual property rights of the alliance members, especially the disadvantaged enterprises, and reduce their intellectual property risks. Doing so encourages alliance members, especially SMEs, to contribute new knowledge, improves cooperative innovation performance, and ultimately advances the stability of asymmetric R&D alliance. The governance mechanism in the alliance mainly includes contract governance and relationship governance [11]. From the perspective of the governance mechanism, the contract is the most effective means to prevent leakage of intellectual property [12]. As a necessary condition for reducing the risk of knowledge leakage, contracts can effectively improve alliance performance [13]. Furthermore, relevant empirical studies have shown that trust can effectively reduce the risk of knowledge loss, thereby reducing knowledge protection behavior in innovation alliance [14]. Trust among alliance members can effectively avoid opportunistic behaviors and positively impact the cooperation of technology alliance [15]. The cooperative innovation in R&D alliance, especially in asymmetric R&D alliance, is a complex and dynamic process, the complexity of knowledge itself, the nonequivalence of resource dependence among alliance members, and the differences in the willingness of alliance members to share, resulting in the governance of asymmetric R&D alliance intellectual property risk that must consider contract governance and relationship governance to promote its stability. In conclusion, the stability of an asymmetric R&D alliance has become an urgent problem to address. Still, few studies on such partnerships can be found, especially from the perspective of SMEs in a weak position. Furthermore, in terms of the governance mechanism of R&D alliance stability, most of the existing studies are from the dimensions of single contract governance or relationship governance. Few studies unify the two types of governance mechanisms in an integrated framework. The improvement of the stability of R&D alliance requires the promotion of knowledge transfer between enterprises by inhibiting the degree to which cooperative enterprises protect their knowledge. This promotion is manifested in the joint regulating effect of contract governance and relationship governance. Therefore, the overall consideration of the two types of governance mechanisms and the analysis of their governance effects on the relationship between intellectual property risk and asymmetric R&D alliance stability will provide more guidance for enhancing the stability of such alliance. This study explores the factors affecting the stability of asymmetric R&D alliance from the perspective of intellectual property and effective governance mechanisms at the alliance level to provide adequate guidance for the theoretical and practical development of asymmetric R&D alliance. Thus, this study investigates 260 high-tech companies participating in asymmetric R&D alliance and discusses the stability of asymmetric R&D alliance from the perspective of intellectual property risk. This study also introduces contract governance mechanisms and relationship governance mechanisms as moderation variables to analyze the individual governance mechanism and joint governance mechanism on the impact of intellectual property risk on the stability of asymmetric R&D alliance. 2. Theoretical Basis 2.1. Asymmetric R&D Alliance Stability Resource dependence theory holds that, depending on the importance, competitiveness, and scarcity of resources, differences are observed in the degree of dependence among enterprises in the alliance [16]. In some R&D alliances, the degree of dependence of members on each other’s resources varies, resulting in a considerable disparity in the status of members within the alliance. This article defines this type of alliance as an asymmetric R&D alliance. The resource-based theory believes that seeking the support of key resources, such as technology or capital, is the main purpose of enterprises joining the R&D alliance. Therefore, the key factor in forming an asymmetric R&D alliance lies in acquiring and integrating scarce resources between SMEs and core enterprises [17]. Asymmetric R&D alliance stability means that, in the process of achieving the goals of an R&D alliance, SMEs and core enterprises steadily implement R&D alliance strategies following established plans, contracts, and goals. It is a relative and dynamic equilibrium that can ensure the normal fluctuations of the R&D alliance relationship. The stability of the asymmetric R&D alliance is manifested in the state, where no member of the asymmetric R&D alliance wants to break away from the alliance relationship and ensure the usual maintenance and development of the R&D alliance system [18]. 2.2. Intellectual Property Risk In cooperative innovation, knowledge sharing among partners will cause the enterprise’s knowledge resources to face a series of risks brought by the opportunistic behavior of partners. One of the primary purposes of enterprises joining R&D alliance is to obtain scarce external knowledge through communication and sharing with alliance members. However, given the intangibility of knowledge and the concealment of loss, enterprises are vulnerable to partner opportunism in the process of participating in R&D cooperation. In cooperative R&D, intellectual property risks are events and their possibilities triggered by the opportunistic behavior of each subject that negatively impact the current or potential rights and interests of intellectual property holders [19]. Intellectual property risk is divided into two categories. One is the risk of intellectual property investment; that is, other partners fail to invest the information and knowledge they promised following the provisions of the cooperation contract, resulting in the risk that the alliance and the enterprise themselves cannot obtain their due rights and interests. The second is the intellectual property loss risk, mainly because of the exposure of key knowledge in the process of cooperation, resulting in the risk of forced occupation or illegal misappropriation of intellectual resources by alliance partners [20]. 2.3. Governance Mechanism Two important governance methods in R&D alliance are contract governance and relationship governance, which emphasize reducing opportunistic behavior and transaction risks in the alliance. Contract governance is to stipulate the rights and obligations of all parties by signing detailed formal contracts with alliance members and as the basis for subsequent dispute settlement [11]. Transaction cost theory believes that the contract has a control function by enhancing the completeness of the contract to increase the trust level of both parties, thereby reducing the opportunistic behavior of alliance members and reducing transaction costs [21]. Furthermore, the relationship governance in the alliance is based on trust, embeds the transaction relationship in the complex social background, and emphasizes establishing emotional connections between members [22]. Unlike transaction cost theory, social exchange theory believes that the relationship established by alliance partners in long-term communication is helpful in the mutual recognition and understanding of the partners and actively controls their opportunistic behavior through social rules and self-restraint [23]. 3. Hypotheses Development 3.1. Intellectual Property Risk and Stability of Asymmetric R&D Alliance In the asymmetric R&D alliance, SMEs have relatively low status and bargaining power because of their strong dependence on core enterprises in technology, capital and market channels [1]. This kind of power imbalance can easily lead to the core enterprises using their dominant position to make profits and affect the stability of asymmetric R&D alliance. The contradiction between the exclusiveness of intellectual property rights and the requirements for intellectual property sharing in cooperative innovation activities in the R&D alliance determines the conflict of intellectual property interests among alliance members. Facing the high risk of intellectual property investment, disadvantaged SMEs will also take preventive measures, including concealing fundamental knowledge or reducing their investment in key knowledge and skills, to avoid high intellectual property investment risk [24]. The R&D alliance is based on the system’s openness through the agglomeration of innovative resources to achieve cooperative innovation. The inventory and sharing level of the alliance resource pool directly affects the stability and operational efficiency of the alliance. The opportunistic behavior of members leads to insufficient investment in effective knowledge resources in the alliance resource pool, which damages the cooperative innovation performance of the R&D alliance and the stability of the R&D alliance. Thus, we put forward the following hypothesis: H1: The intellectual property investment risk negatively affects the stability of an asymmetric R&D alliance. Given the characteristics of intangibility and specificity of intellectual property, once an intellectual property holding company invests its knowledge in the R&D alliance, it will weaken its ability to control it and cause the risk of leakage or even infringement of intellectual property rights [25]. This risk is likely to occur in asymmetric R&D alliance. When facing a high risk of intellectual property loss, SMEs will take corresponding measures to prevent the leakage of core knowledge to safeguard personal interests [26]. When the collective interests of the R&D alliance conflict with their personal interests, the enterprise, as an independent economic entity, often chooses to sacrifice the overall interest of the alliance to maximize its interests [27]. Therefore, in the asymmetric R&D alliance, given the existence of expected intellectual property loss risks, such as malicious theft or accidental disclosure of intellectual property rights by strong partners in the process of R&D cooperation, the willingness and level of SMEs to share intellectual property rights are reduced, which is not conducive to alliance members in the absorption and integration of knowledge, reducing the learning efficiency between organizations and affecting the stability of asymmetric R&D alliance. Thus, we put forward the following hypothesis: H2: The intellectual property loss risk negatively affects the stability of an asymmetric R&D alliance. 3.2. Moderating Role of Individual Governance Mechanism 3.2.1. Moderating Role of Contract Governance The theory of institutional economics points out that, in the R&D alliance, regulating and guiding the behavior of the subject to suppress opportunistic behavior are necessary. The negative effects of subjective behavior caused by opportunistic tendencies make the R&D alliance inefficient or even disintegrate. Therefore, how to suppress the opportunistic behavior of alliance members has become the focus of R&D alliance governance. Transaction cost theory believes that formal governance structures and contracts can effectively suppress opportunistic tendencies [28]. Contractual governance emphasizes the detailed provisions of the rights and obligations of R&D alliance members by signing legally effective clauses [29] and relying on the binding force of law to ensure that alliance members fulfil their commitments [30]. Based on the process perspective, contract formulation is a process of the alliance members’ game and of coordinating the expected benefits of the parties [31]. Contract governance coordinates the individual interests of the alliance members and the common interests of the alliance by jointly agreeing on the scope and extent of intellectual property sharing among asymmetric R&D alliance members and the distribution mechanism of cooperative R&D results [32]. It also allows alliance members to acquire knowledge and enhance their expertise legally, reducing the expectations of asymmetric R&D alliance members, especially disadvantaged SMEs, about intellectual property risks, encouraging them to contribute new knowledge, expanding the public knowledge set of asymmetric R&D alliance, improving the consistency of objectives of alliance members and maintaining stable R&D partnerships. Based on the perspective of results, the establishment of contractual relationships can effectively reduce mutual distrust, especially when the relationship between the two parties is not close, or the rights of both parties are not equal. A formal governance system will make alliance members feel that they have enough control over partner behavior. Thus, their confidence is enhanced, especially vulnerable members’, in cooperative behavior, and the investment of exclusive resources is increased, such as intellectual property [33], which is conducive to enriching the alliance resource pool and improving the stability of asymmetric R&D alliance. Therefore, in the governance of the relationship between intellectual property risk and asymmetric R&D alliance stability, contract governance mainly reduces intellectual property risks by reducing the differences between alliance members and controlling the possibility of knowledge spill over. The higher the degree of contract governance is, the more the R&D alliance can control intellectual transaction activities, reduce intellectual property risks caused by incomplete sharing or exceeding the permitted use of intellectual property, and restrain the negative effects of intellectual property risks on the stability of asymmetric R&D alliance influences. Thus, the following hypotheses are proposed: H3: The contract governance mechanism can effectively moderate the relationship between intellectual property investment risk and the stability of the asymmetric R&D alliance. That is, the higher the degree of contract governance, the weaker the impact of intellectual property investment risk on the stability of the asymmetric R&D alliance. H4: The contract governance mechanism can effectively regulate the relationship between intellectual property loss risk and the stability of asymmetric R&D alliance. That is, the higher the degree of contract governance is, the weaker the intellectual property loss risk will affect the stability of the asymmetric R&D alliance. 3.2.2. Moderating Role of Relationship Governance Social exchange theory believes that the sharing of intellectual property rights between alliance partners is a repetitive exchange embedded in the social network [34]. The relationship contract governance mechanism emphasizes that enterprises rely on social norms and values for self-discipline and strengthen the emotional connection between alliance partners and establish mutual trust relationships, thereby reducing transaction costs under uncertain conditions and strengthening the willingness and continuity of R&D alliance members to cooperate on intellectual property [35]. As far as the alliance level is concerned, establishing a relationship is also a process of enhancing trust among alliance subjects. Firstly, the relationship governance based on social norms can promote enterprises to restrain their opportunistic behavior tendency actively and enhance their confidence in other R&D alliance partners. Partners will pay attention to their reputation and will not use their superior position in the alliance to abuse or steal the core knowledge resources of the enterprise deliberately. Thus, the concerns of alliance members will lessen, especially SMEs with lower status in the alliance, about the security of their intellectual property. Consequently, SEMs are encouraged to share their intellectual property, improve the efficiency of interaction [36], and enhance the stability of asymmetric R&D alliance. Secondly, the enterprise that adopts relationship governance helps gain the trust and recognition of other members from the perceptual level [37]. Through relational contract governance, the views and understandings of partners on issues are more consistent, thus improving the reputation and legitimacy of the enterprise within the alliance and obtaining more shared resources [38]. The establishment of a good partnership can stimulate the positive behavior motivation of R&D alliance members and lays the foundation for the smooth development of R&D cooperation among alliance members and the alliance’s stability. Therefore, the relationship governance mechanism positively affects the operation of asymmetric R&D alliance through the positive reinforcement of the alliance subject relationship while negatively reinforcing the negative behavior of the alliance subject. Therefore, this article believes that the relationship governance mechanisms, such as trust and reputation, can effectively reduce intellectual property risks and maintain the stability of asymmetric R&D alliance. Thus, the following hypotheses are proposed: H5: The relationship governance mechanism can effectively moderate the relationship between the intellectual property investment risk and the stability of asymmetric R&D alliance. That is, the higher the degree of relationship governance, the weaker the impact of intellectual property investment risk on the stability of asymmetric R&D alliance. H6: The relationship governance mechanism can effectively moderate the relationship between the intellectual property loss risk and the stability of asymmetric R&D alliance. That is, the higher the degree of relationship governance is, the weaker the intellectual property loss risk will affect the stability of the asymmetric R&D alliance. 3.3. Joint Moderating Role of Contract Governance and Relationship Governance Mechanism Although the contract governance mechanism and the relationship governance mechanism can effectively restrain the behavior of alliance members, they have great differences in their action mechanism. The contract governance mechanism assumes that alliance members tend to be egoistic and need to restrict their behavior through negative incentives, such as punishment. In contrast, the relationship governance mechanism emphasizes establishing trust among the members and actively restrains members opportunism tendency by relying on values and social norms. In other words, the contract governance mechanism achieves the purpose of restraining the behavior of alliance members by controlling their negative extrinsic motivation, whereas the relationship governance mechanism constrains their behavior by stimulating the positive intrinsic motivation of alliance members [39]. Thus, does the joint use of the contract and relationship governance mechanism have better results? On the one hand, the relationship contract governance is helpful in making up for the deficiency of contract governance. Firstly, the completeness of contracts is often accompanied by rigidity and inflexibility. Under the complete contract governance mechanism, members of the asymmetric R&D alliance will only share the intellectual property content specified in the contract and strictly monitor the exchange and use of intellectual property throughout the process. Doing so stimulates mutual prevention and vigilance among alliance members easily [40], hinders the sharing of knowledge resources among alliance members, and leads to asymmetric R&D alliance breakdown. The establishment of a relationship governance mechanism means two things. The members of the asymmetric R&D alliance believe that their partners will not maliciously steal and disclose their key intellectual property. The trusted members will also actively suppress their opportunistic tendencies [41], avoid the prisoner’s dilemma of a single transaction, reduce the cost of contract signing and supervision, and facilitate repeated transactions. These will effectively curb intellectual property risks and enhance the willingness to share intellectual property among alliance members. Making up for the deficiency of contract governance mechanism on controlling the intellectual property risk to a certain extent and maintaining a good interaction between alliance members are helpful. Secondly, the completeness of the contract governance mechanism needs to be supplemented by the relationship governance mechanism. When the level of trust among members of an asymmetric R&D alliance is low, the level of intellectual property cooperation among members is also relatively low. At this time, only rough and straightforward contract terms can meet the needs. With the gradual deepening of trust between the two parties in the asymmetric R&D alliance, the breadth and depth of R&D cooperation between alliance members have also been expanding, which requires more comprehensive, complex, and detailed contractual terms to adapt to it. Meanwhile, the tacit behavioral understanding and cognitive experience formed by alliance partners in the long-term mutual communication will continue to deepen and will be gradually fixed in the form of formal contracts, forming a supplement and improvement to the original contract content [42]. Consequently, the intellectual property risks caused by members’ opportunistic behavior will be restrained, making the asymmetric R&D alliance more stable and smoother. On the other hand, relationship governance also requires contract governance to coordinate. Firstly, the establishment and deepening of the relationship require the contract to provide a formal communication channel and platform [43]. In the initial stage of establishing the R&D alliance, especially asymmetric R&D alliance, the trust among alliance members is low. If no contract governance mechanism is involved, vulnerable members will reject deep intellectual property sharing, because of the lack of formal communication platforms and the expectation of high intellectual property investment and loss risk. Thus, the efficiency of R&D cooperation will be hindered, and the stability of asymmetric R&D alliance will be affected. At this time, a complete contractual governance mechanism can use the authority of law to encourage members of the asymmetric R&D alliance to build formal knowledge sharing channels, deepen mutual understanding through formal communication, gradually reach consensus on issues and basic trust, and further develop formal communication into relationship-based informal communication, continuously strengthening the relationship between members [22] and reducing the intellectual property risk concerns of alliance members, especially vulnerable companies. Secondly, the governance of in-depth relationship contracts requires the protection of contracts. Although the establishment of relationship contracts, such as trust, helps members of asymmetric R&D alliance strengthen the openness of intellectual property and other knowledge resources and deepen interorganizational learning, excessive trust will weaken supervision [44], leading to alliance members. In particular, disadvantaged SMEs face higher investment in intellectual property rights and risk of loss. Contracts based on the legal system can protect the interests of underprivileged companies that contribute intellectual property rights through the authority of the law [34]. Thus, it makes up for the potential intellectual property risks caused by the excessive trust and provides a formal guarantee for the governance of relationship contracts. Furthermore, the relationship governance mechanism and the contract governance mechanism can jointly influence the relationship between intellectual property risk and asymmetric R&D alliance stability. The combined use of contract governance and relationship governance mechanism emphasizes the role of relationship governance in asymmetric R&D alliance to avoid intellectual property risk and strengthen trust. It also attaches importance to the contract governance in the guarantee of R&D cooperation innovation performance and the containment of opportunism in asymmetric R&D alliance. Therefore, when high-strength contract governance and high-strength relationship governance are adopted, the negative impact of intellectual property risk on the stability of asymmetric R&D alliance will be relatively weakened. Therefore, this study proposes the following assumptions: H7: Contracts and relationship governance have a joint moderating effect on the relationship between intellectual property investment risk and asymmetric R&D alliance stability. That is, when the “double high-strength” governance combination is implemented, the intellectual property investment risk has the weakest impact on asymmetric R&D alliance stability. H8: Contracts and relationship governance have a joint regulation effect on the relationship between intellectual property loss risk and asymmetric R&D alliance stability. That is, when the “double high-strength” governance combination is implemented, the intellectual property loss risk has the weakest impact on asymmetric R&D alliance stability. In summary, this paper constructs the model of the mechanism of the intellectual property risks on the stability of asymmetric R&D alliance, as shown in Figure 1.
... And, if trust is lacking, bureaucratic control mechanisms need to be instilled to govern the collaboration. From this it follows that organisations will choose one of the three governance mechanisms (Rediker and Seth, 1995;Huber et al., 2013). ...
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