The role of relational norms in enhancing adaptation in business relationships by controlling uncertainty and opportunism

This study focuses on adaptation within marketing relationships. Within marketing theory, adaptation refers to the practice of making investments which are of particular relevance to a specific relationship. Considerable benefits flow from making such investments in the form of enhanced performance (Parkhe, 1993; Dyer, 1996). Within transaction cost analysis literature, Williamson (1999, p.312) described adatation as the "central problem of economic organization". According to Williamson (1975), adaptation is impeded by uncertainty and the threat of opportunism. In order to counter these problems, Williamson argues that governance structures need to be in place which will achieve the dual aims of both controlling the risks posed by uncertainty and opportunism, and also enhancing adaptation within relationships. Despite the centrality of importance attributed to adaptation by Williamson, there is a paucity of empirical research into this area within transaction cost analysis literature. A literature review shows that there has been very little examination of the problems posed by uncertainty and opportunism to adaptation within relationships. Furthermore, the literature review also showed that extant research on governance within transaction cost analysis is concerned predominantly with issue surrounding choices of governance, rather than the effectiveness of different modes of governance as a means of managing adaptation within relationships. Williamson (1991a), in particular, cast doubt on the capacity of hybrid forms of governance, such as relational norms, to manage the adaptation process but there is an absence of investigation within the literature into this matter. However, there is an absence of research into the capacity of relational norms to act as form of governance that can manage the risks of uncertainty and opportunism, as well as to enhance adaptation within relationships. This gap in the research forms the aim of this study, which seeks to provide systematic research and empirical evidence into the role of relational norms as a governance structure for adaptation within relationships. The setting for the empirical research was the UK automotive sector. Analysis of the data showed that the negative, hypothesised effect of opportunism on adaptation was supported. It was also shown that when the effect of an interaction of the norm of information exchange and opportunism on adaptation was modelled a significant, positive effect was reported. A similar, positive result was reported when the effect of an interaction of uncertainty and the norm of solidarity on adaptation was modelled. A divergence in results was found in several areas involving human and technological adaptation, and the role of uncertainty, which may have been caused by situational factors. Areas in need of further research, in particular those involving a divergence of recults are identified. This study contributes to literature in several ways. It represents the first study which has considered the relational norms as a form of governance for adaptation within relationships. The negative effect of opportunism on adaptation is shown to be a factor that must be managed. Furthermore, the roles of norms, in particular information exchange and solidarity are shown to be effective in assisting the governance of adaptation. Finally, the study provides specific guidance to management on the means to improve the governance of adaptation within relationships