Interfirm behavior and goal alignment in relational exchanges

This article considers the potential antecedents and performance-related consequences of a socialization-based approach to governing interfirm relationships. Relational behaviors, the manifestation of relational norms, are considered as a form of governance, in contrast to more formal and explicit contract-based approaches. The study addresses a gap in extant literature in relation to understanding how manager-actionable behaviors (i.e., supportive leadership, behavior-based monitoring) influence relational behaviors, and whether this form of relationship governance has performance implications. Data from a mail survey of construction industry contractors and subcontractors are analyzed. The authors find that relational governance can be effective in achieving coordination in marketing relationships, which in turn improves financial performance. Contractors' supportive leadership and behavior-based monitoring efforts respectively play positive and negative roles in shaping relational behavior. However, the interaction of leadership and monitoring is crucial, with subcontractors tolerating monitoring when contractors employ a management approach that combines monitoring and supportive leadership. This research provides support for the notion that relational governance can be a solution to agency problems of hidden action. The findings have implications for the theory and practice of relationship management, particularly as firms seek out alternatives to formal approaches to relationship management.