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Summary of the article ‘Examining the Conditional Limits of Relational Governance: Specialized Assets, Performance Ambiguity, and Long-Standing Ties’$3.23
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Specialized Assets, Performance Ambiguity, and Long-
Standing Ties
Samenvatting ‘Examining the Conditional Limits of Relational
Governance: Specialized Assets, Performance Ambiguity, and Long-
Standing Ties’
Relational governance is to govern transactions through relational norms. Thus, relational
governance involves trust as an organizing principle, as well as specific routines and actions
that facilitate work and information coordination. Het idee is dat relational governance
zorgt voor vertrouwen en ervoor zorgt dat bedrijven elkaar niet misleiden en dat relational
governance daardoor een positieve invloed heeft op performance.
Echter laat deze paper zien dat er via drie wegen juist een negatieve invloed is van relational
governance op performance. This alternative position suggests that when the gains from
self-interested behaviour are sufficient, the performance benefits associated with relational
governance decline.
1. Asset specificity
The higher the level of asset specificity, the weaker is the relationship between
relational governance and performance. With specialized assets, exchange parties
may strategically disclose private information to foster their bargaining position or
hold up the transaction through delays or by undermining concerns about product
quality, costs, or performance.
2. Measurement difficulty
The higher the level of performance measurement difficulty, the weaker is the
relationship between relational governance and performance.
When performance is difficult to measure, parties have incentives to limit their
efforts because their partner cannot accurately measure and reward performance.
Lower performance thus results from the inability to measure effort. When
determining whether to take advantage of asymmetric information arising from
difficult performance measurement, parties systematically weigh the costs of getting
caught and the benefits of shirking.
3. Long-standing ties
The longer the exchange tenure, the weaker is the relationship between relational
governance and performance.
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