Dynamics of relationship governance in TPL arragements: a dyadic perspective.

Abstract: Purpose – To improve the understanding of the inter-organizational dynamics of the dyadic relationships between a buyer and provider of logistics services (TPL dyads). Design/methodology/approach – Analyzes the preparation, implementation, and operation of a particular case of third party logistics (TPL) arrangements. Based on a single case study of a dyadic relationship, the paper confronts the static view of the transaction cost approach and the agency theory on “governance structures” and “contracts” by showing how “relationship governance” emerges and develops over time. Findings – TPL dyads are subject to both controllable and non-controllable forces of change, which may not always have a positive effect on the logistics performance or the relationship itself. Inter-organizational dynamics not only relate to learning, competence development, or adaptation, as suggested by other studies, but also to how the dyadic relationships are governed. As the dyad accumulates experience over time, changes will occur in the balance between the two parties in terms of goal congruence and risk preferences, which has a strong influence on the nature of contracts and other safeguards governing the relationship. Similarly, explanatory power of theories applicable to inter-organizational settings may vary as relationships emerge and develop over time. Focus on core competencies as the logic of outsourcing is followed by a period characterized by a principal-agent relationship. To ensure further prosperity of the relationship, the two companies must direct their efforts towards the logic of the network approach.