Research Summary

Governance of Interorganizational Exchange

by Ranjay Gulati

Description

In a series of papers, I examine the antecedents and consequences of governance choices in exchange relations. Using data from the automotive industry, a coauthor and I have examined the dynamics associated with the social and contractual structure of sourcing relationships in this context. We develop a theory about (1) when and how pre-existing trust-the level of trust established prior to the current exchange-complements governance in directly enhancing exchange performance regardless of the governance structure used and (2) when and how pre-existing trust leads to the substitution of one governance mode for another, which may in turn shape exchange performance indirectly. In another co-authored study I am investigating the extent to which firms exchange information among their internal units versus with their external suppliers of components. Our findings confirm my prior field observations that in many instances the extent of information exchanged is actually lower among internal units than between the firm and its external suppliers. However, we also find that this reduced level of information exchange does not have a significant effect on the performance of the relationship.  We develop a theory to explain these findings. In a separate, conceptual paper my coauthor and I reexamine the traditional assumption of make and buy as mutually exclusive choices. We present an integrated theory of plural sourcing, wherein firms use multiple governance modes simultaneously to procure the same input.