RELATIONAL GOVERNANCE AS AN INTERORGANIZATIONAL STRATEGY - AN EMPIRICAL-TEST OF THE ROLE OF TRUST IN ECONOMIC EXCHANGE

We develop a model of relational governance as a specific form of inte rorganizational strategy that is distinct from the traditional modes o f markets and hierarchies. We conceptualize this form of strategy in t erms of structural and processual dimensions and derive a model of its determinants through arguments drawn from transaction cost economics and the sociological exchange literature. Hierarchical regression mode ling is employed to test the theoretical model on data collected from a sample of 329 independent insurance agencies. We include the relatio nal variable of trust and demonstrate that the combined model explains relational governance better than a model with the traditional determ inants of governance form alone. Further, we observe that governance s tructure and process are related and discuss implications of the dynam ic link between them. Directions for extensions are developed for stra tegic management research and practice.