Towards a Model of Governance in Complex (Product-Service) Inter-Organisational Systems

The relationship between buyer and supplier has never been simple when what is being bought is a complex capital asset that will be operated and maintained over many years. Traditional business models coped with this complexity by a division of labour based on sub-sets of the value chain. Recently, customers in a wide range of sectors are not buying sub-contract manufacturing capacity but procuring business ‘solutions'. These shifts mean that inter-organisational interactions are changing in terms of their scale, scope and dynamic, requiring a reconsiderations of those mechanisms that co-ordinate inter-organisational behaviour. Therefore, the paper aims to develop a novel perspective on the governance of these complex supply interactions. It builds a model based on the core notions of contractual and relational mechanisms, and reflects on how these interact across different levels of analysis and over time. The paper concludes that contractual and relational governance mechanisms are distinct but inseparable parts of a governance continuum, involving multi-level interactions and transitions. These interactions influence the behaviour of exchange partners and ultimately impacting on the effectiveness of the overall governance