Formal and informal governance of interorganizational relations

This dissertation includes three essays on the interplay between formal and informal governance in the context of interorganizational exchanges such as buyer-supplier relationships and alliances. The essays examine how formal and informal mechanisms interact and jointly contribute to superior interorganizational performance.; The first essay discusses why firms often seek to balance the cooperation-based advantages of strong ties (partnerships) with the autonomy-based advantages of weak ties (arm's-length exchanges) into a single relationship. However, such a combination is unstable, because the degree of cooperation and autonomy of ties is influenced by informal processes---socialization and learning---that are constantly shifting. Thus, firms cannot directly control the functionality of ties, but they can alter the trajectory of those informal processes through periodic adjustments in formal mechanisms that change interorganizational commitment. The essay discusses how these "churning" ties can be used to increase the performance of interorganizational relations.; The second essay uses experimental evidence to test competing theories on whether incomplete incentive contracts complement the self-enforcement of informal dealings, or substitute for ("crowd out") social norms supporting informal arrangements. Results indicate that, by enforcing contractible exchange dimensions, contracts facilitate the self-enforcement of non-contractible dimensions. This complementarity effect is particularly important when repetition of the exchange is unlikely and thus self-enforcement is difficult. Although the data suggest that reciprocity may be an informal enforcement mechanism, evidence that contracts substitute for this norm is not robust.; The third essay analyzes competing alliances between multiple firms, commonly referred to as constellations. The essay outlines sources of benefits from constellation membership and offers novel hypotheses about how group organization---i.e., whether the constellation is explicit (based on formal, multilateral agreements) or implicit (informal clusters based on the structure of bilateral ties among firms)---affects those sources. Namely, the essay proposes that generic group characteristics, which determine the total value generated by the group, contribute more to explaining interfirm performance differences in explicit constellations than in implicit ones. However, this effect is reversed in the case of member-specific attributes, which allow firms to capture differential benefits within the same group. Evidence from the global airline industry supports this theory.