Global marketing and procurement of industrial products: Institutional design of interfirm functional tasks

Marketing and procuring component parts in the global marketplace can pose such significant trading hazards that industrial transactions often must be embedded in protective governance. This article identifies key forces influencing the institutional designs that best safeguard exchanges between international trading partners for such industrial tasks as the design, fabrication and delivery of component parts. The effectiveness of designs such as market contracting, alliances, and international joint ventures are shown to be a consequence of the transactional characteristics of a given task, the governance risks experienced by both buyer and supplier, and the differences between the institutional environments of the partners' countries. In addition to a comprehensive institutional design model, several propositions are developed to serve as a guide to future empirical research in the areas of global industrial marketing and procurement.