The Effect Of Buyer Governance Structures On Performance: Contextual Effects Of Interfirm Benevolence

Abstract

Researchers identify two types of organizational governance: unilateral governance and bilateral governance. Although interfirm governance is at the core of interfirm relationships, little research exists on mechanisms that strengthen the weak spots in the dynamics of interfirm governance and multiple governance structures. This study introduces the concept of interfirm benevolence, and attempts to enhance our understanding of the conditions under which buyers rely on interfirm governance. The results indicate that the interfirm governance practices of a buyer tend to produce higher levels of supplier performance when a supplier trusts in the benevolence of the buyer. Also, this study shows that when a benevolent buyer uses both unilateral and bilateral governance simultaneously, suppliers perform positively.