How to govern business services exchanges: Contractual and relational issues

Abstract

With firms concentrating on core competencies, more emphasis has been placed on outsourcing and dealing with external sourcing agents. This has led to a stronger academic focus on buyer-seller exchanges and the corresponding mechanisms for governing these exchanges. This paper gives an overview of previous research investigating the exchange governance phenomenon based on transaction cost theory or co-operative interorganizational relationships. The results reveal that few research studies have investigated the overall picture of exchange governance, including both contractual and relational governance and taking into account antecedents as well as performance outcomes of the governance mechanisms involved. Moreover, despite the service-dominant logic shift, limited attention is given to specific service characteristics and their impact on exchange governance. This paper attempts to meld economic and social related antecedents into a model with regard to exchange governance in business services settings. Contractual and relational governance issues and their impact on performance outcomes are also considered. The resulting model indicates that to govern business services exchanges efficiently, more emphasis should be placed on behavioral uncertainty, human and process asset specificity and contractual governance. The paper concludes by discussing several directions for future research.

What Determines the Formal Versus Relational Nature of Local Government Contracting?

“…As mentioned, the two distinctive patterns to describe (or prescribe) interorganizational resource exchanges are formal and relational governance (Poppo and Zenger 2002;Vandaele et al 2007). Formal governance relies heavily on "detailed, binding legal agreements that specify the obligations and roles of both parties in the relationship" (Vandaele et al 2007, 240).…”

“…Some directly test whether formal and relational governance methods function as mutually enhancing rather than competing mechanisms for different types of services (Goo et al 2009;Poppo and Zenger 2002;Vandaele et al 2007). Others point out that formal and relational management practices may coexist (Van Slyke 2007).…”

A Business-Focused It Service Model for Cloud

“…The work of (Vandaele et al 2007) describes the management relationships between consuming organizations and service suppliers and usefully separates the concepts of contractual governance and relationship governance. Both are treated equally but the relationship between them is not further defined.…”

Contract functions in service exchange governance: evidence from logistics outsourcing

“…Collectively this research stream remains divided over the role of formal contracts in logistics outsourcing governance reflecting also trends in the broader governance literature (Cao and Lumineau 2015;Vandaele et al 2007;Klein-Woolthuis, Hillebrand, and Nooteboom 2005). Detailed contracts are either perceived as signals of lack of trust (Lambert et al 1999), or complements to trust, commitment, flexibility and relational norms to ensure exchange effectiveness (Hofenk et al 2011;Boyson et al 1999).…”