The role of dependence and information sharing on governance decisions regarding conflict

• Pages: 409-434
• Date: 12 February 2018
• Published date: 12 February 2018
• DOI: https://doi.org/10.1108/IJLM-12-2016-0301
• Author: Stephanie Eckerd,Kevin Sweeney
• Subject Matter: Management science & operations,Logistics

The role of dependence and

information sharing on

governance decisions

regarding conflict

Stephanie Eckerd

Kelley School of Business, Indiana University, Indianapolis, Indiana, USA, and

Kevin Sweeney

Department of Management and Marketing, Sam Houston State University,

Huntsville, Texas, USA

Abstract

Purpose –Contemporary supply chain exchanges are governed by both contractual and relational

governance mechanisms. However, the decision about when to use these mechanisms is likely driven by key

relationship characteristics as well as the context in which they are needed. The purpose of this paper is to

evaluate the influence of dependence and information sharing on the governance decision within the context

of inter-organizational conflict, and assess the degree to which contractual and relational governance

approaches lead to more satisfying outcomes.

Design/methodology/approach –This research builds on both transaction cost and conflict resolution

arguments to build hypotheses. To test the hypotheses, survey data were collected from supply chain

professionals regarding specific episodes of conflict and analyzed using an ordinary least squares regression.

Findings –The results show a strong reluctance for the use of relational governance mechanisms to resolve

conflict when the relationship is characterized by strong joint dependency or information sharing

asymmetries. A strong dependence asymmetry and high degree of joint information sharing are associated

with greater use of contractual and relational governance approaches, respectively. Finally, the authors find

that contractual mechanisms do not necessarily lead to a dissatisfactory outcome for the manager involved.

Originality/value –This research investigates not only the use of contractual and relational governance

mechanisms in inter-firm conflict resolution, but also the relationship specific factors that influence a firm’s

decision to leverage either type of governance mechanism.

Keywords North America, Survey, Regression, Supplier relations, Regression analysis,

Conflict management, Supply chain governance, Survey methods

Paper type Research paper

1. Introduction

Collaboration between buyers and suppliers is frequently shown to have significant positive

impacts on the performance, efficiency, and relational outcomes of supply chains and their

member firms (Fawcett et al., 2012; Lado et al., 2011; Nyaga et al., 2010; Raue and Wieland,

2015). Despite the numerous benefits to be gleaned from supply chain partnerships, there is

considerable risk and difficulty in organizing exchange across multiple firms. To facilitate

these exchanges, it is generally understood that two distinct forms of governance manage

most buyer-supplier relationships: contractual and relational (Cao and Lumineau, 2015;

Lumineau and Henderson, 2012; Poppo and Zenger, 2002). Contemporary literature has

characterized contractual governance as the extent an inter-organizational relationship

(IOR) is governed by a formal and written contract which delineates the responsibilities of

each party, while relational governance refers to the extent that an IOR is governed by

shared expectations and norms (Cao and Lumineau, 2015). While representing substantively

different approaches to governance, both contractual and relational governance are present

in most exchange relationships, albeit to varying degrees. Moreover, these governance

mechanisms do not operate within a vacuum, and key relationship characteristics will likely

The International Journal of

Logistics Management

Vol. 29 No. 1, 2018

pp. 409-434

© Emerald PublishingLimited

0957-4093

DOI 10.1108/IJLM-12-2016-0301

Received 30 December 2016

Revised 21 April 2017

17 July 2017

Accepted 3 October 2017

The current issue and full text archive of this journal is available on Emerald Insight at:

www.emeraldinsight.com/0957-4093.htm

409

Role of

dependence and

information

sharing

influence the successful deployment of them, especially at different points within the

relationship life cycle (Cao and Lumineau, 2015; Ring and Van de Ven, 1994). As such, the

research question we examine is how key relationship characteristics influence the decision

to utilize specific governance mechanisms within the context of inter-organizational conflict.

More specifically, we draw on transaction cost theory to investigate how dependence and

information sharing between exchange partners might influence the decision to rely on

contractual and/or relational forms of governance in response to a dispute.

The theory of transaction costs is concerned with appropriate inter-organizational

governance where there is the potential for opportunism and concern regarding the

bounded rationality of actors (Cannon et al., 2000). Within the transaction cost framework,

dependence is related to the risk of opportunism that firms face as a consequence of the

exchange, while information sharing between firms relates both to opportunism and

the ability to make decisions within a bounded rationality. Given the critical nature of these

relationship characteristics on the governance decision, we include dependence and

information sharing, as well as a focal firm’s perceptions of their partner’s dependency and

information sharing policies, in our investigation.

We examine our research question within the context of inter-organizational conflict.

As depicted in the supply chain literature, inter-organizational conflict occurs when one

organization perceives that another party is hindering its interests or goal achievement

(Cahill et al., 2010). Conflict is a frequent occurrence in inter-organizational exchange, and is

a critical area of study due to its economic and social repercussions (Lumineau et al., 2015).

Important for our research focus, conflict calls for a governance intervention in the dispute

resolution process (Lumineau and Malhotra, 2011). While on the surface conflict is generally

perceived as a negative experience, the process by which the conflict is resolved can

potentially benefit the organizations involved. Thus, the governance approach firms use

in resolving conflict will have a discernible impact on the outcome. We include in our study

an outcome of managerial satisfaction as it is currently an under-evaluated outcome of the

conflict governance decision (Malhotra and Lumineau, 2011).

The rest of the paper is organized as follows: Section 2 presents the theoretical

background and hypotheses, Section 3 discusses the methodology and data collection,

Section 4 describes the results of the empirical model, Section 5 discusses the results of the

paper in the broader context of conflict resolution, and Section 6 concludes the paper.

2. Theoretical framework

Generally speaking, conflict is defined as existing “whenever incompatible activities occur”

(Deutsch, 1973, p. 10), a definition which has extended to work examining conflict in the

inter-organizational domain (Vaaland and Hakansson, 2003). Previous research on the

management of inter-organizational conflict tends to follow two general approaches.

The first stream of literature focuses on specific repair actions adopted, such as apologies

(Harmon et al., 2014; Tomlinson et al., 2004) and explanations ( Janowicz-Pungiantan and

Krishanan, 2009; Shapiro, 1991). The second stream evaluates more broad-based repair

negotiation strategies, many of which adopt the lens of integrative vs distributive repair

behaviors (Dant and Schul, 1992; Mohr and Spekman, 1994; Koza and Dant, 2007). While

this latter stream more closely aligns with our research, a notable gap exists within this

literature in understanding how the informal and formal mechanisms of relational and

contractual strategies inform conflict management (Lumineau et al., 2015).

Faced with conflict within an exchange relationship, parties have the option of

leveraging any number of contractual and relational governance mechanisms in an attempt

to resolve the incompatibility. Contemporary literature has defined contractual governance

as the extent an IOR is governed by a formal and explicit contract, while relational

governance is defined as the extent that an IOR is governed by informal structures and

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