scispace - formally typeset
Search or ask a question

Showing papers in "Strategic Management Journal in 2015"


Journal ArticleDOI
TL;DR: This work identifies specific types of cognitive capabilities that are likely to underpin dynamic managerial capabilities for sensing, seizing, and reconfiguring, and explains their potential impact on strategic change of organizations.
Abstract: The microfoundations of dynamic capabilities have assumed greater importance in the search for factors that facilitate strategic change. Here, we focus on microfoundations at the level of the individual manager. We introduce the concept of “managerial cognitive capability,” which highlights the fact that capabilities involve the capacity to perform not only physical but also mental activities. We identify specific types of cognitive capabilities that are likely to underpin dynamic managerial capabilities for sensing, seizing, and reconfiguring, and explain their potential impact on strategic change of organizations. In addition, we discuss how heterogeneity of these cognitive capabilities may produce heterogeneity of dynamic managerial capabilities among top executives, which may contribute to differential performance of organizations under conditions of change. Finally, we propose possible directions for future research. Copyright © 2014 John Wiley & Sons, Ltd.

1,081 citations


Journal ArticleDOI
TL;DR: This article examined whether product market competition affects corporate social responsibility (CSR) and found that domestic companies respond to tariff reductions by increasing their engagement in CSR, which supports the view of CSR as a competitive strategy that allows companies to differentiate themselves from their foreign rivals.
Abstract: This study examines whether product market competition affects corporate social responsibility (CSR). To obtain exogenous variation in product market competition, I exploit a quasi-natural experiment provided by large import tariff reductions that occurred between 1992 and 2005 in the U.S. manufacturing sector. Using a difference-in-differences methodology, I find that domestic companies respond to tariff reductions by increasing their engagement in CSR. This finding supports the view of “CSR as a competitive strategy” that allows companies to differentiate themselves from their foreign rivals. Overall, my results highlight that trade liberalization is an important factor that shapes

449 citations


Journal ArticleDOI
TL;DR: In this paper, the authors explore the impact of corporate social responsibility ratings on sell-side analysts' assessments of firms' future financial performance and find that when analysts perceive CSR as an agency cost they produce pessimistic recommendations for firms with high CSR ratings.
Abstract: We explore the impact of corporate social responsibility (CSR) ratings on sell-side analysts' assessments of firms' future financial performance. We suggest that when analysts perceive CSR as an agency cost they produce pessimistic recommendations for firms with high CSR ratings. Moreover, we theorize that, over time, the emergence of a stakeholder focus shifts the analysts' perceptions of CSR. Using a large sample of publicly traded U.S. firms over 15 years, we confirm that, in the early 1990s, analysts issue more pessimistic recommendations for firms with high CSR ratings. However, analysts progressively assess these firms more optimistically over time. Furthermore, we find that analysts of highest status are the first to shift the relation between CSR ratings and investment recommendation optimism.

448 citations


Journal ArticleDOI
TL;DR: It is found that, counter to theories of recombination, patents that originate new topics are more likely to be associated with local search, while economic value is the product of broader recombinations as well as novelty.
Abstract: We explore the double-edged sword of recombination in generating breakthrough innovation: recombination of distant or diverse knowledge is needed because knowledge in a narrow domain might trigger myopia, but recombination can be counterproductive when local search is needed to identify anomalies. We take into account how creativity shapes both the cognitive novelty of the idea and the subsequent realization of economic value. We develop a text-based measure of novel ideas in patents using topic modeling to identify those patents that originate new topics in a body of knowledge. We find that, counter to theories of recombination, patents that originate new topics are more likely to be associated with local search, while economic value is the product of broader recombinations as well as novelty

419 citations


Journal ArticleDOI
TL;DR: This work outlines an EO reconceptualization addressing the likely prevalence of Type II nomological error in the EO literature stemming from measurement model misspecification and proposes a formative construction of EO viewing the exhibition of entrepreneurial behaviors and of managerial attitude towards risk as jointly necessary dimensions that collectively form the higher-order EO construct.
Abstract: Entrepreneurial orientation (EO)—a firm's strategic posture towards entrepreneurship—has become the predominant construct of interest in strategic entrepreneurship research. Despite the ever-increasing volume of nomological research on EO, there remain ongoing conversations regarding its ontology. Drawing from measurement theory, we outline an EO reconceptualization addressing the likely prevalence of Type II nomological error in the EO literature stemming from measurement model misspecification. Focusing on the question of whether EO is an attitudinal construct, a behavioral construct, or both, we propose a formative construction of EO viewing the exhibition of entrepreneurial behaviors and of managerial attitude towards risk as jointly necessary dimensions that collectively form the higher-order EO construct. We present an empirical illustration of our reconceptualization followed by a discussion of future research opportunities

410 citations


Journal ArticleDOI
TL;DR: In response to critiques of strategy tools as unhelpful or potentially dangerous for organizations, a sociological eye is suggested on how tools are actually mobilized by strategy makers, offering a framework for examining the ways that the affordances of strategy tool and the agency of strategy makers interact to shape how and when tools are selected and applied.
Abstract: In response to critiques of strategy tools as unhelpful or potentially dangerous for organizations, we suggest casting a sociological eye on how tools are actually mobilized by strategy makers. In conceptualizing strategy tools as tools-in-use, we offer a framework for examining the ways that the affordances of strategy tools and the agency of strategy makers interact to shape how and when tools are selected and applied. Further, rather than evaluating the ‘correct’ or ‘incorrect’ use of tools, we highlight the variety of outcomes that result, not just for organizations but also for the tools and the individuals who use them. We illustrate this framework with a vignette and propose an agenda and methodological approaches for further scholarship on the use of strategy tools.

391 citations


Journal ArticleDOI
TL;DR: In this article, the authors argue that analyst recommendations mediate the relationship between corporate social performance and firm stock returns, and uncover an information-based underlying mechanism for the link between Corporate Social performance and financial performance.
Abstract: This study posits that security analysts heed corporate social performance information and factor it into their recommendations to general investors. In particular, as corporate social performance is often uncertain and ambiguous to general investors, analysts may serve as the informational pathway connecting corporate social performance to firm stock returns. Thus, we argue that analyst recommendations mediate the relationship between corporate social performance and firm stock returns. On the basis of not only a qualitative study with literature searches and interviews of stock analysts but also a quantitative study with two longitudinal samples of large firms, we find support for these arguments. Our findings uncover an information-based underlying mechanism for the link between corporate social performance and financial performance.

368 citations


Journal ArticleDOI
TL;DR: In this paper, the authors identify three categories of product-related services from a product firm: smoothing and adapting services, complementing products, and substitution services, which enable customers to pay for the use of a product without buying the product itself.
Abstract: Services of different types have become increasingly important for product firms. While these firms mainly focus on products, managers and researchers lack a comprehensive framework to understand when to make significant investments in particular kinds of services. We identify three categories of product-related services from a product firm—smoothing and adapting services, which complement products, and substitution services, which enable customers to pay for the use of a product without buying the product itself. We develop propositions about the relative level of these different kinds of services vis-a-vis industry evolution, as well as suggest how these services affect industry structure. We draw upon various literatures, though we conclude that the relationship between products and services is more complex and richer than any one literature suggests.

360 citations


Journal ArticleDOI
TL;DR: In this article, the authors examine the effect of CEO resource orchestration in a multi-industry sample of 190 Korean firms and demonstrate that CEO emphasis on strategic HRM is a significant antecedent to commitment-based HR systems.
Abstract: In order to be effective, managers at all levels of the firm must engage in resource management activities, and these efforts are synchronized and orchestrated by top management. Using a specific type of strategic resource, commitment-based human resource systems, we examine the effect of CEO resource orchestration in a multi-industry sample of 190 Korean firms. Our results demonstrate that CEO emphasis on strategic HRM is a significant antecedent to commitment-based HR systems. Furthermore, our results also suggest that CEO emphasis on strategic HRM has its primary effects on firm performance through commitment-based HR systems. This finding underscores the importance of middle managers in operationalizing top management's strategic emphasis, lending empirical support to a fundamental tenet of resource orchestration arguments.

322 citations


Journal ArticleDOI
TL;DR: In this article, the authors established a link between CEO hubris and corporate social responsibility (CSR), and explored the boundary conditions of hubris effects and how these relationships are moderated by resource dependence mechanisms.
Abstract: Grounded in the upper echelons perspective and stakeholder theory, this study establishes a link between CEO hubris and corporate social responsibility (CSR). We first develop the theoretical argument that CEO hubris is negatively related to a firm's socially responsible activities but positively related to its socially irresponsible activities. We then explore the boundary conditions of hubris effects and how these relationships are moderated by resource dependence mechanisms. With a longitudinal dataset of S&P 1500 index firms for the period 2001–2010, we find that the relationship between CEO hubris and CSR is weakened when the firm depends more on stakeholders for resources, such as when its internal resource endowments are diminished as indicated by firm size and slack, and when the external market becomes more uncertain and competitive. The implications of our findings for upper echelons theory and the CSR research are discussed

308 citations


Journal ArticleDOI
TL;DR: Using variance partitioning methodologies on data spanning 60 years and more than 18,000 firm-years, it is found that the proportion of variance in performance explained by individual CEOs, or “the CEO effect,” increased substantially over the decades of study.
Abstract: We introduce a new explanation for one of the most pronounced phenomena on the American business landscape in recent decades: a dramatic increase in attributions of CEO significance. Specifically, we test the possibility that America's CEOs became seen as increasingly significant because they were, in fact, increasingly significant. Employing variance partitioning methodologies on data spanning 60 years and more than 18,000 firm-years, we find that the proportion of variance in performance explained by individual CEOs, or “the CEO effect,” increased substantially over the decades of study. We discuss the theoretical and practical implications of this finding. Copyright © 2014 John Wiley & Sons, Ltd.

Journal ArticleDOI
TL;DR: The cognitive processes that enable decision makers to switch between exploitation and exploration are studied and the idea that stronger activation of the brain circuits related to attentional control allows individuals to achieve better decision-making performance is proposed and tested.
Abstract: This paper studies the cognitive processes that enable decision makers to switch between exploitation and exploration We use functional magnetic resonance imaging (fMRI) in a sample of expert decision makers to make two main contributions First, we identify and contrast the specific brain regions and cognitive processes associated with exploitation and exploration decisions Exploitation activates regions associated with reward seeking, which track and evaluate the value of current choices, while exploration relies on regions associated with attentional control, tracking the value of alternative choices Second, we propose and test the idea that stronger activation of the brain circuits related to attentional control allows individuals to achieve better decision-making performance as a result We discuss the implications of these results for strategic management research and practice

Journal ArticleDOI
TL;DR: In this paper, the authors propose a conceptual framework for relational competition, which can contrast the rivalrous and competitive-cooperative modes and a new approach called relational competition and draw conjectures about the moderators, such as industry and culture, that determine the appropriateness of these forms of interaction.
Abstract: Competitive dynamics research, despite progress, lacks a conceptual framework that can extend the field's reach to address today's environment. Increasing stakeholder power and globalization are but two of the organizational and economic forces compelling a broader conceptualization of competition. Our framework expands competitive dynamics along five dimensions—aims of competition, mode of competing, roster of actors, action toolkit, and time horizon of interaction—that prove useful for contrasting the rivalrous and competitive-cooperative modes and a new approach we call relational competition. We draw conjectures about the moderators, such as industry and culture, that determine the appropriateness of these forms of interaction, and conclude by relating our method to three discrete perspectives: the configurational, transaction cost, and stakeholder views.

Journal ArticleDOI
TL;DR: The authors investigated whether managers' personal political orientation helps explain tax avoidance at the firms they manage and found that firms with top executives who lean toward the Republican Party actually engage in less tax avoidance than firms whose executives lean towards the Democratic Party.
Abstract: We investigate whether managers' personal political orientation helps explain tax avoidance at the firms they manage. Results reveal the intriguing finding that, on average, firms with top executives who lean toward the Republican Party actually engage in less tax avoidance than firms whose executives lean toward the Democratic Party. We also examine changes in tax avoidance around CEO turnovers and find corroborating evidence. Additionally, we find that political orientation is helpful in explaining top management team composition and CEO succession. Our paper extends theory and research by (1) illustrating how tax avoidance can serve as another measure of corporate risk taking and (2) using political orientation as a proxy for managerial conservatism, which is an ex ante measure of a manager's propensity toward risk

Journal ArticleDOI
TL;DR: Li et al. as mentioned in this paper examined the boundary conditions concerning which types of firms and which type of ties help firms and further examined the relative impact of local and central ties on the television manufacturing industry in China.
Abstract: Several studies suggest that political ties help firms survive or perform but do not examine the boundary conditions concerning which types of firms and which type of ties help firms. We draw from resource dependence and resource-based theories to argue that political ties can improve both firm survival (labeled “buffering”) and performance (labeled “enabling”), with weaker firms gaining more from buffering and stronger firms gaining more from enabling. We further examine the relative impact of local and central ties. We test our hypotheses on the television manufacturing industry in China between 1993 and 2003. Results demonstrate the buffering roles of political ties, and under narrower conditions, their enabling roles. Local ties account for these outcomes, while central ties do not provide buffering or enabling benefits. Copyright © 2014 John Wiley & Sons, Ltd.

Journal ArticleDOI
TL;DR: Results indicate that the positive effects of external knowledge on innovation generation become more positive when individuals sourcing external knowledge span structural holes in the internal knowledge-sharing network.
Abstract: Building on absorptive capacity and social network research, in this paper I investigate how individuals inside the organization use external knowledge to generate innovations. Through original sociometric data collected from 276 scientists, researchers, and engineers from the Research and Development division of a large multinational high-tech company, I show that the effects of external knowledge on individuals' innovativeness are contingent upon individuals' position in the internal social structure. In particular, results indicate that the positive effects of external knowledge on innovation generation become more positive when individuals sourcing external knowledge span structural holes in the internal knowledge-sharing network

Journal ArticleDOI
TL;DR: This article found that complementor development responds to platform growth even without sales incentives, but that attracting complementors has a net zero effect on on-going development and fails to stimulate network effects.
Abstract: Platforms have evolved beyond just being organized as multi-sided markets with complementors selling to users. Complementors are often unpaid, working outside of a price system and driven by heterogeneous sources of motivation—which should affect how they respond to platform growth. Does reliance on network effects and strategies to attract large numbers of complementors remain advisable in such contexts? We test hypotheses related to these issues using data from 85 online multi-player game platforms with unpaid complementors. We find that complementor development responds to platform growth even without sales incentives, but that attracting complementors has a net zero effect on on-going development and fails to stimulate network effects. We discuss conditions under which a strategy of using unpaid crowd complementors remains advantageous.

Journal ArticleDOI
Sergio G. Lazzarini1
TL;DR: In this paper, the authors propose a model where such a link is mediated by the accumulation and churning of local resources and capabilities, which occurs if a firm's observed performance is superior to the expected performance of competitors had they received the same array of policies.
Abstract: Despite the prevalence of governmental action devised to foster firms and industries, the link between industrial policy (IP) and competitive advantage has received scant attention in strategic management. I propose a model where such a link is mediated by the accumulation and churning of local resources and capabilities. I also introduce the concept of support-adjusted sustainable competitive advantage (SASCA), which occurs if a firm's observed performance is superior to the expected performance of competitors had they received the same array of policies. I argue that achieving SASCA through IP is a difficult endeavor and requires the interplay of three conditions: insertion in global production networks, geographical specificity, and governmental capability. Thus, the model expands the potential determinants of competitive advantage into the context of governmental intervention.

Journal ArticleDOI
TL;DR: Based on a sample of TMTs in technology firms, it is found that the three facets of structural interdependence are potent moderators of two classic predictions: the positive association between T MT heterogeneity and member departures, and between TMT heterogeneity and firm performance.
Abstract: Studies of the effects of top management team (TMT) composition on organizational outcomes have yielded mixed and confusing results. A possible breakthrough resides in the reality that TMTs vary in how they are fundamentally structured. Some are structured such that members operate independently of each other, while others are set up such that roles are highly interdependent. We examine the potential for three facets of structural interdependence—horizontal, vertical, and reward interdependence—to resolve ambiguities regarding effects of TMT heterogeneity. Based on a sample of TMTs in technology firms, we find that the three facets of structural interdependence are potent moderators of two classic predictions: the positive association between TMT heterogeneity and member departures, and between TMT heterogeneity and firm performance. Copyright © 2014 John Wiley & Sons, Ltd.

Journal ArticleDOI
TL;DR: This work incorporates categorical dynamics into the theory of the industry life cycle to complement and enhance the predictive power of the existing theories of entry timing and introduces the concept of a dominant category — the conceptual schema that most stakeholders adhere to when referring to products that address similar needs and compete for the same market space.
Abstract: The optimal time to enter emerging industries is a key concern in strategy, yet scholars struggle to create a theoretical foundation that can integrate conflicting empirical findings. We incorporate categorical dynamics to industry life cycle theory to enhance existing entry timing theories. We introduce the concept of a dominant category�the conceptual schema that most stakeholders adhere to when referring to products that address similar needs and compete for the same market space�linking it to the dominant technological design and entry-timing advantages. In particular, we propose the existence of a window of opportunity for firm entry that starts with the emergence of the dominant category and ends with the emergence of the dominant design

Journal ArticleDOI
TL;DR: In this paper, the cognitive efforts of senior decision makers of an inexperienced multinational, as they assessed a potential acquisition in a politically hazardous African country, were examined, and they applied a diversity of heuristics, some with clear building block rules, to build small world representations of this very uncertain strategic context.
Abstract: Heuristics have long been associated with problems of bias and framing error, often on the basis of simulation and laboratory studies. In this field study of a high-stakes strategic decision, we explore an alternative view that heuristics may serve as powerful cognitive tools that enable, rather than limit, decision making in dynamic and uncertain environments. We examine the cognitive efforts of senior decision makers of an inexperienced multinational, as they assessed a potential acquisition in a politically hazardous African country. They applied a diversity of heuristics, some with clear building block rules, to build small world representations of this very uncertain strategic context. More expert individuals drew on experiential learning to build richer representations of the political hazard environment

Journal ArticleDOI
TL;DR: In this article, the authors extend the "institutional voids" perspective on business groups by examining the value-add potential of two of the characteristic features of business groups: their diverse portfolio and multi-entity organizational form.
Abstract: We extend the “institutional voids” perspective on business groups by examining the value-adding potential of two of the characteristic features of business groups: their diverse portfolio and multi-entity organizational form. We maintain that portfolio diversity affords affiliates privileged access to opportunities hidden by incomplete strategic factor markets. We hypothesize that the multi-entity organizational form enables superior sensing and seizing of these growth opportunities by affiliate firms. We further suggest that, in the context of institutional reforms, these characteristics strengthen business group affiliates' ability to capitalize on the expanded set of opportunities made available by the reform program. Empirical analyses on a sample of Indian firms over the period 1994–2010 support our hypotheses. Implications for theory and future directions are discussed

Journal ArticleDOI
TL;DR: Based on dyadic survey data from 171 strategic alliances, it is found that the calculative perspective has higher predictive power when the partner lacks a favorable reputation and the relational perspective predicts trustworthiness more strongly when familiarity with the partner organization is high.
Abstract: Research on the sources of organizational trustworthiness remains bifurcated. Some scholars have adopted a calculative perspective, stressing the primacy of actors' rational calculations, while others have approached trustworthiness from a relational perspective, focusing on its social underpinnings. We help to reconcile these seemingly disparate views by adopting an integrative approach that allows us to clarify the boundaries of both perspectives. Based on dyadic survey data from 171 strategic alliances, we find that the calculative perspective (represented by contractual safeguards) has higher predictive power when the partner lacks a favorable reputation. In contrast, the relational perspective (represented by organizational culture) predicts trustworthiness more strongly when familiarity with the partner organization is high.

Journal ArticleDOI
TL;DR: In this article, the interaction effects of institutional differences in the cognitive, normative, and regulatory domains on cross-border acquisition and alliance formation are examined, showing that regulatory distance moderates the mimicking of both foreign and local firms while normative distance does not have any moderating effect.
Abstract: This paper examines the interaction effects of institutional differences in the cognitive, normative, and regulatory domains on cross-border acquisition and alliance formation. Using a sample of 673 cross-border acquisitions and alliances conducted by multinational corporations (MNCs) from the manufacturing sector of six emerging economies (EEs) over the period 1995–2008, we find significant mimicking (cognitive domain) of local firms' choice of ownership modes by EE firms. We also find that regulatory distance (regulatory domain) moderates the mimicking of both foreign and local firms while normative distance does not have any moderating effect. These findings contribute to our understanding of how EE MNCs mimic ownership modes in foreign market entry and how the interaction of this mimetic tendency with other institutional pillars affects these decisions

Journal ArticleDOI
TL;DR: This paper showed that superior reputation perceptions issued by the general public increase shareholder value, as measured by future stock returns, by applying a conceptualization of reputation that balances both its affective and cognitive components.
Abstract: Superior corporate reputations can have strategic value for firms. Of the “multiple reputations” associated with each firm, we focus on the perceptions of the general public. The public represents the most widely defined stakeholder group but has attracted the least amount of research interest to date. Drawing on data for German firms, this study demonstrates that superior reputation perceptions issued by the general public increase shareholder value, as measured by future stock returns. This study provides a more nuanced understanding for this novel finding. Applying a conceptualization of reputation that balances both its affective and cognitive components, we find that reputation perceptions that are driven by nonfinancial aspects are more value relevant in the future than reputation perceptions that are driven by previous financial performance. Copyright © 2014 John Wiley & Sons, Ltd.

Journal ArticleDOI
TL;DR: In this article, a dynamic institution-based view of the firm is proposed to consider how speed of reforms (rate of market liberalization achieved over time) affects the performance of firms from transitioning economies.
Abstract: We advance a dynamic institution-based view of the firm that extends the theory's current focus on scope of pro-market reforms (degree of market liberalization in a given year) to consider how speed of reforms (rate of market liberalization achieved over time) affects the performance of firms from transitioning economies. Utilizing a sample of public firms from Chinese provinces with varying reform speeds, we find that while scope of reforms positively impacts firm performance, speed of reforms detracts from firm performance. We further find that while family firms have an advantage in gradually reforming provinces, non-family firms have an advantage in rapidly reforming provinces. Thus, we extend the institution-based view across time (speed of reforms) and firms (family vs. non-family firms).

Journal ArticleDOI
TL;DR: In this article, the complementary assets framework is used to predict entrants' technology choices in an emerging industry, and it is shown that diversifying entrants are more likely to choose technologies with higher technical performance and for which key complementary assets are available in the ecosystem.
Abstract: Entrants in new industries pursue distinct technologies in hopes of winning the technology competition and achieving sustainable competitive advantage. We draw on the complementary assets framework to predict entrants' technology choices in an emerging industry. Evidence from the global solar photovoltaic industry supports our arguments that entrants are more likely to choose technologies with higher technical performance and for which key complementary assets are available in the ecosystem. However, diversifying entrants are more likely to trade off superior performance for complementary asset availability whereas start-up entrants are more likely to trade off complementary asset availability for superior performance. This difference is largely due to diversifying entrants with pre-entry capabilities related to the industry. The study offers a novel illustration of how complementarities and competition shape entry strategies.

Journal ArticleDOI
TL;DR: In this paper, the authors investigate how global firms from different industries attempt to define the architecture for a new market and find that powerful players from different industry have difficulty in reaching agreement on the new market's architecture due to their history of dominance in their respective industries.
Abstract: In this inductive multiple-case study set in the nascent market for mobile payments, we investigate how global firms from different industries attempt to define the architecture for a new market. We find that powerful players from different industries have difficulty in reaching agreement on the new market's architecture due to their history of dominance in their respective industries. This disagreement in turn leads to a weak compromise on market architecture and creates a vicious cycle of resource allocation deferment. We show that the nascent market is thus less likely to emerge despite country-level attempts at resolving these issues. Our findings contribute to resource dependence theory and to theories of market emergence, and lead to a deeper understanding of when and how markets fail to emerge. Copyright © 2014 John Wiley & Sons, Ltd.

Journal ArticleDOI
TL;DR: In this article, the authors examined the simultaneous effects of brand equity and human capital on firm value and showed that both resources create relatively more value in a service setting than a manufacturing setting.
Abstract: Research and managerial practice generally contend that human capital and brand equity constitute a company’s most valuable resources. Relying on similar underlying theoretical rationales, research on the value relevance of these two resources has developed in different disciplines. Combining diverse data sources, the authors examine the simultaneous effects of brand equity and human capital on firm value. In addition, they consider how much the effects of these two resources differ between services and manufacturing. Results provide evidence for a complementary relationship between human capital and brand equity and show that both resources create relatively more value in a service setting.

Journal ArticleDOI
TL;DR: In this paper, the authors examined the effects of contractual and relational governance on provider opportunism, incorporating the moderating influence of a "shift parameter" (national culture) and found that contractual governance is more effective in individualistic and low uncertainty avoidance cultures.
Abstract: To address concerns of opportunism, outsourcing firms are encouraged to deploy contractual and relational governance. The individual and collective effects of these mechanisms have been previously examined but not in specific contexts. This study examines the effects of contractual and relational governance on provider opportunism, incorporating the moderating influence of a “shift parameter”—national culture. Our results reveal that contractual governance is more effective in individualistic and low uncertainty avoidance cultures. Relational governance is more effective in collectivist and high uncertainty avoidance societies. The individualism–collectivism dimension also moderates the joint effect of these mechanisms. While the mechanisms are generally complementary in mitigating opportunism, a singular focus on either contractual or relational can be just as effective under situations of high individualism and collectivism, respectively.