Enhancing alliance performance: The effects of contractual-based versus relational-based governance

This study draws upon work in transaction cost economics and relational capital theory to examine the effect of governance structure on alliance performance. The authors distinguish the strategic performance of an alliance and the overall market performance and test the relationship between the two. The analysis of 184 business alliances suggests that relational-based governance as opposed to contractual-based governance is more effective and influential in strengthening the interfirm partnership, stabilizing the alliance, and facilitating knowledge transfer between alliance partners. The positive effects of relational-based governance are enhanced under high pressure of environmental turbulence.