The Impact of Governance Mechanisms on Transaction-Specific Investments in Supplier-Manufacture Relationships: A Comparison of Local and Foreign Manufacturers

Abstract

Abstract and Key Results This study explores the impact that formal and relational governance mechanisms have in inducing local suppliers to make transaction-specific investments in foreign and local manufacturers, respectively. Analyses, in this regard, were based on a sample comprised of 77 local supplier/foreign manufacturer relationships and 57 local supplier/local manufacturer relationships in China. The efficacy of different governance mechanisms, as shaped by local and foreign manufacturers, exerts varying degrees of impact on suppliers’ transaction-specific investments.