The effect of dual relational embeddedness and trust on alliance governance

Abstract

Purpose

Previous studies have illustrated that relational embeddedness is an important factor in alliance governance, but the homogeneity of it turned out to be an obstacle in the path of alliance governance research. In light of this theoretical gap, the purpose of this study is to answering the following questions: Is relational embeddedness homogeneous? How does dual relational embeddedness and inter-firm trust influence alliance governance (especially the equity governance)?

Design/methodology/approach

Based on the perspective of transaction cost economics, there is traditional “transaction characteristics-prevention cost-alliance governance” framework from Williamson. In this study, we firstly introduce relational embeddedness and inter-firm trust into new model as moderating variable which based on the primary hypotheses in traditional framework; secondly, from the social network view, we analysis the dual nature of relational embeddedness and inter-firm trust. Thirdly, the authors refine the above moderating effect from different type of relational embeddedness and inter-firm trust. The authors conduct empirical analyses based on survey data of 328 Chinese manufacturing enterprises, and multiple regression analyses were used to test the above mentioned moderating effect.

Findings

The results show: ERE (economic relational embeddedness) and SRE (social relational embeddedness), respectively, lead to deterrence-based trust and knowledge-based trust. The ERE and deterrence-based trust strengthen the tendency towards hierarchical equity cooperation, while SRE and knowledge-based trust weaken the likelihood of equity cooperation choices being made.

Research limitations/implications

This study has made some encouraging progress, but there are still some problems and elements worthy of further study. First, from the view of independent variables, the authors did not include any transaction characteristics (such as asset co-specificity) in our integrated model. Secondly, and most importantly, the authors found some variables outside the analysis framework (such as whether involving R&D or core technology). After interaction with these variables, it is possible that the moderating role of relational embeddedness and trust, and especially the effects of SRE and KBT on equity cooperative governance, may be reversed.

Practical implications

Inter-firm cooperation is an important and special organization, which can joint interdependent resources to create value. This paper provides suggestions to Chinese enterprises which could help them realize the duality of relationship character and how to properly implement alliance governance. It helps enterprises to realize that relational embeddedness is not homogeneous and clarify the relationship between inter-firm trust and alliance governance. This research indicates the firm manager that effective alliance governance comes from appropriate relational embeddedness and inter-firm trust.

Originality/value

Overall, three contributions emerge: first, the authors construct a relational embeddedness and classical framework that overcomes the traditional deficiencies of being static and one-sided. Secondly, the forward research of dual embeddedness and trust improves the relational embeddedness theory and provides new ideas for subsequent research. Last but not least, the research clearly indicates that ambidextrous relational embeddedness leads to ambidextrous trust, which not only refines the existing research into trust mechanisms, but also clarifies the relationship between trust and alliance governance.

Citation

Li, D. and Yang, J. (2017), "The effect of dual relational embeddedness and trust on alliance governance", Corporate Governance, Vol. 17 No. 5, pp. 913-926. https://doi.org/10.1108/CG-10-2016-0193