The authors extend transaction cost analysis into a governance value analysis (GVA) framework to address marketing strategy decisions, especially with regard to strategies grounded in cooperative relationships. The GVA is a four-part model. Heterogeneous resources, positioning, the consequent attributes of exchange, and governance form all interact to determine success in creating and claiming value. The trade-offs among these factors are the core insight offered by the modei. The authors illustrate these trade-offs and specify empirically refutable implications. Finaiiy, they sketch directions for future work and a blueprint for managerial decision making.

The exclusion of firm-specific considerations in the standard (economizing calculus) approach to buyer–supplier ties makes the large variations in the types of contracts used within the same industry unexplainable. This article tests Ghosh and John's (1999) strategizing calculus model that purports to close this gap. The core organizing principle of this model is a three-way fit among firm resources, investments, and governance that yields the highest net receipts. From this principle, the authors derive predictions and test them using data from 193 original equipment manufacturers that engage independent component suppliers. The data show that investments must be aligned with more complete contract terms (e.g., fixed prices, “hard” designs) to yield cost reduction outcomes for all firms. However, investments must be aligned with more incomplete contracts (e.g., cost-plus prices, “soft” designs) to yield end-product enhancement outcomes, but only for firms with relatively small downstream market margins. Firms with larger downstream market margins find that the previous alignment reduces end-product enhancements. These results are robust to checks for common method bias and alternative estimation procedures. The authors discuss practical guidelines for the desired tightness of supplier contract terms from the three-way fit principle.

Governance theories, such as transaction cost economics, argue that systematic deviations from an attributegovernance alignment should influence performance. This article investigates the performance implications of contract specificity for the procurement of information technology products. The authors argue that parties choose a level of contract specificity that economizes on both the ex ante contracting costs and the ex post transaction costs and that deviations between the observed and the predicted levels of contract specificity are an important determinant of these transaction costs. The authors test the hypotheses using a comprehensive archival data set of information technology transactions and employ a two-step estimation procedure. First, they estimate the "predicted" level of contract specificity, which accounts for key transactional attributes. Second, they study the consequences of deviating from this predicted level of contractual specificity. The results provide the first explicit demonstration of the trade-off between ex ante contracting costs and ex post transaction problems and suggest that parties need to economize jointly on these costs when choosing the governance form.

Branded components are becoming increasingly popular in industrial markets; yet extant research provides limited understanding of the use of such arrangements in the real world. The authors use the governance lens of transaction cost economics to propose that leveraging the vendor's brand reputation and safeguarding the vendor's customization investments are key motivators for choosing branded component contracts. Data on 191 contracts from three engineering-intensive industry sectors provide support to the authors' hypotheses. The authors find that firms are more likely to choose branded component contracts when the supplier's brand name adds significant differentiation (leveraging) and when the component supplier has made significant component customization investments (safeguarding). This safeguarding motivation is relevant even to suppliers with modest brand reputation. The authors also investigate the normative consequences of these contracting decisions and find significant adverse outcomes from choosing the "wrong" contract form. Furthermore, they find that these outcomes are asymmetric in nature. In particular, choosing a "white box" contract when the theory argues for a branded component contract leads to more adverse outcomes than choosing a branded component contract when the theory predicts a "white box" contract. Finally, the authors draw key conclusions for theory and managerial practice.

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