Untangling Safeguard and Production Coordination Effects in Long-Term Buyer-Supplier Relationships

Abstract

We untangle safeguard and coordination effects of interfirm governance mechanisms in the context of hazardous buyer-supplier relationships. We propose that the extent to which such mechanisms prevail as safeguards or coordination devices varies with the moderating effects of complexity and asset specificity. In nonspecific but complex exchanges, such mechanisms operate more as coordination mechanisms, whereas in specific, noncomplex ones, they are safeguard mechanisms. Through a system of mathematical derivatives, we specify and quantify these conditions to demonstrate when each theoretical perspective is more relevant. We validate our model with survey data from 239 suppliers and explore implications for theory and practice.