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and Key Results• This study explores the impact that formal and relational governance mechanisms have in inducing local suppliers to make transaction-specific investments in foreign and local manufacturers, respectively. • Analyses, in this regard, were based on a sample comprised of 77 local supplier/ foreign manufacturer relationships and 57 local supplier/local manufacturer relationships in China. • The efficacy of different governance mechanisms, as shaped by local and foreign manufacturers, exerts varying degrees of impact on suppliers' transaction-specific investments.