Control mechanisms and the relationship life cycle: Implications for safeguarding specific investments and developing commitment

Powerful suppliers often require retailers to make significant idiosyncrati c investments to improve coordination between organizations and to enhance the supplier's presence in the end market. The authors examine how a retail er might better manage the hold-up potential of these transaction-specific investments (TSIs) through the use of three control mechanisms: supplier's TSIs, the development of relational norms, and the use of explicit contract s. Moreover, the authors consider the time-dependent nature of these mechan isms by observing their effects on commitment over the course of a relation ship life cycle. The results indicate that (1) a retailer's TSIs have a neg ative effect on its perceptions of supplier commitment; (2) a supplier's TS Is and relational norms increase the retailer's perception of supplier comm itment, whereas explicit contracts are associated with perceptions of lower supplier commitment; and (3) each of the three control mechanisms moderate s the negative impact of retailer investments on perceptions of supplier co mmitment contingent on the relationship phase. Specifically, bilateral TSIs enhance commitment in the exploration phase and a positive effect during t he decline phase. The results also indicate that the retailer's perceptions of supplier commitment are positively related to its evaluation of supplie r performance and satisfaction and negatively related to conflict.