The role of structural governance and relational governance in developing successful relationship between buyers and suppliers: a case study of construction industry in Nepal

Abstract

Structural governance and relational governance are the mechanisms that are adopted to address the governance issues in alliances. In governance literature, structural and relational governance can either complement or substitute each other in strategic alliances. However, little has been focused between buyer and supplier to extend the discussion of governing issues in inter-organizational relationships. To address this shortfall, this study employs a cross-sectional dataset of 175 alliances between construction companies and material suppliers in Nepal to test the model that conceptualizes the buyer and supplier exchange relationship from beginning to performance using structural equation modeling. The finding suggests that the governing mechanisms, such as risk-related and input-related agreements, of structural governance can lay a domain where trust can thrive. A trust between parties can help enhance the exchange relationship, by easing communication, leading the relationship to exchange performance measured by satisfaction and collaboration.