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

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.