Governance mechanisms interplay in resolving international buyer-supplier relationship conflicts

The research investigates the impact and interplay of formal and informal governance mechanisms in mitigating conflicts in international buyer-supplier relationships. The study deploys a multi-level analysis by focusing on boundary-spanners and inter-organizational relationships. An organizational information processing theory (OIPT) perspective is deployed to examine the individual roles and complementary effects of governance mechanisms when addressing inter-organizational conflicts. Rich datasets were collected from twelve Indian suppliers and their international buyers. Findings illustrate that ‘soft’ formal governance mechanisms, emphasizing the coordination, communication and sense-making functions, in combination with informal governance mechanisms can be used as an effective combination facilitate conflict resolution. In contrast, ‘hard’ formal governance mechanisms, emphasizing control functions through, for instance, third party involvement, substitute informal governance mechanisms and have a negative impact on the relationship. The interplay of ‘soft’ formal and informal governance mechanisms and boundary-spanners were crucial in receiving, translating and transmitting routine and non-routine information facilitating buyer-supplier conflict resolution.