Governance Mechanisms and New Venture Performance in China

Abstract

Despite increasing attention have been paid to the role of external relationship management, some studies have been concerned about established firms’ relationship management; however, only few studies have explicitly discussed the role of relationship management for new venture performance in a transition economy. Trust and contracts are two kinds of governance mechanisms to manage external relationship. This research focuses on trust and contracts and examines their impacts on new ventures’ performance. Moreover, we argue that resource acquisition mediates the relationship between governance mechanisms and new venture performance. By using survey data from 188 questionnaires, this study finds that trust and contracts are positively associated with relationship performance and economic performance. New ventures also obtain more relationship and economic performance through resource acquisition. In addition, trust and contracts are substitutable that affect economic performance, but the interaction is not associated with relationship performance. Copyright © 2013 John Wiley & Sons, Ltd.