Governance mechanisms in transnational business relationships

Empirical research on buyer-supplier relationships has almost exclusively examined domestic (both firms from the same country) exchange. The growing importance of international marketing and global sourcing suggest a need to understand relationships across national boundaries -- transnational business relationships. Drawing on theories of governance, the authors hypothesize differences in governance between domestic and transnational business relationships. They examine the use of three specific governance mechanisms (market governance, trust, and formal contracts) commonly employed in buyer-supplier relationships. Hypotheses are tested with data from 511 purchasing professionals in the United States and Germany (201 reporting on transnational relationships). Results indicate that market governance and trust are used less in transnational than in domestic relationships. No differences are found in the use of contracts. Implications for theory and practice are discussed