JOURNAL OF OPERATIONS MANAGEMENT

Abstract

As trade barriers have been reduced and IT and logistics technologies have improved, buyer-supplier relationships increasingly involve not only domestic partners but also international partners (Joshi, 2009;Kaufmann and Carter, 2006).Many firms in developed countries establish buyer-supplier relationships with firms from emerging economies such as China.According to the U.S. Department of Commerce (2007), U.S. automakers imported $ 8.5 billion worth of Chinese automotive parts in 2007, making China the fourth largest source of auto parts after Mexico, Canada, and Japan.How to effectively manage domestic and international buyer-supplier relationships thus represents a major challenge for many firms.Control mechanisms in interfirm cooperation -structural arrangements deployed to regulate partners' behavior -greatly influence the success of buyer-supplier relationships (Fryxell et al., 2002).Choosing effective control mechanisms is a must when managing these interorganizational relationships (Jap and Ganesan, 2000).There are two broad categories of control mechanisms:(1) formal control (which primarily relies on contracts) and (2) social control (which primarily relies on informal means) (Dyer and Singh, 1998;Uzzi, 1997).The existing literature has focused on two crucial questions: (1) What are the antecedents that lead to the adoption of formal control, social control, or both in domestic and international buyer-supplier relationships?(2) What is the nature of the relationship between formal control and social control in explaining cooperation performance-are they substitutes or complements?Addressing the first question, the existing literature has generally adopted transaction cost economics (TCE) as its underlying paradigm (Williamson, 1985;Wuyts and Geyskens, 2005).It is mainly because TCE focuses on the make-or-buy decision, which is crucial in buyer-supplier relationships (Williamson, 2008).Researchers in this stream assume that minimizing transaction costs is the fundamental driver for firms to adopt various control mechanisms in interfirm exchanges (Poppo and Zenger, 2002).Thus, several transaction cost factors have been identified as antecedents of control mechanisms, including asset specificity, environmental uncertainty, and behavioral uncertainty (Beckman et al.,