Relationship Governance Dynamics: The Role of Partner Selection Efforts and Mutual Investments

Abstract

To explicate interfirm governance in the context of supplier–reseller relationships, this article reports on a longitudinal study conducted to examine the roles of supplier selection efforts and mutual specific investments, with respect to motivating a supplier to make incremental investments, as well as safeguarding the investments from supplier ex post transaction costs. The authors also examine the joint effects of selection efforts and mutual investments on supplier ex post transaction costs. From a practical standpoint, the findings suggest new guidelines for channel strategy. Theoretically, they provide new insights into relationship dynamics and offer evidence about the effects of a firm’s governance choices over time.