Do exchange hazards always foster relational governance? An empirical test of the role of communication

This empirical paper explores economic and social origins of relational governance. Previous empirical research has provided substantial support for the positive relationship between exchange hazards (such as transaction specific assets or decision uncertainty) and relational governance. In contrast, we use transaction cost economics to argue that exchange hazards might limit the use of relational governance when power asymmetry exists within a marketing channel. Moreover, from a sociological perspective, a governance mechanism is not determined solely by initial exchange conditions; the process in which the interorganizational exchange emerges and develops also influences it. We argue that the social contact that occurs through inter-organizational communication not only is a critical determinant of relational governance, but it also may moderate opportunism arising from exchange hazards, thus increasing the establishment of relational governance. Overall, the empirical results support our hypotheses.