"Does It Matter If You Got It Wrong? Governance Misalignment, Opportunism and Performance"

Studies on the effect of governance misalignment on opportunism and performance in buyer-supplier relationships are rare and the findings inconsistent. Drawing on transaction cost economics, we test the relationships between too high and too low levels of contractual and relational governance on ex-post opportunism and supplier performance. Our findings based on primary data from the German banking industry show that both under- and over-governance create trade-offs. Under-governance (contractual or relational) leads to more opportunism but also to higher performance. Over-governance in either dimension reduces opportunism but at the cost of lower performance, especially for relational governance mechanisms. Implications for future research are discussed.