Transaction cost, strategic positioning, and institutional determinants of relationship governance in international business-to-business relationships

This paper examines transaction cost, strategic and societal influences on the organization and management of cross-border relationships. A firm’s product differentiation strategy and the export market’s ethnocentricity are identified as possible antecedents to relation-specific investments whereas the export market’s regulative institutional environment is identified as a possible antecedent to relationship governance. The hypotheses are empirically tested on a sample of 160 international business-to-business relationships. The results show that the suggested antecedents impact the level of specific investments in the relationships and how the relationships are governed. The results also show that specific investments play an important mediating role between, on the one side, strategic and societal influences, and on the other side, the extent to which the relationship is governed by formal contracting.