A decision-process model of relational risk and governance and their impact on performance

The purpose of this paper is to investigate the link among risk, governance, and performance. In order to achieve this objective, the paper examines the impact of relational risk on governance decision options (trust, bilateral control, and unilateral control) and performance (design time). Survey research was conducted to collect data from 221 new product development (NPD) relationships and structural equation modeling was conducted to test the hypotheses. The results suggest that relational risk influences trust and bilateral control negatively and unilateral control positively. Results also indicated that trust and bilateral control are positively related to shortened design time while unilateral control and shortened design time are negatively related. We also found that there are threshold effects for modes of governance decision as they influence shortened design time. This study enhances the understanding of NPD relationships by examining the key mechanisms through which governance decision modes are influenced and how they influence NPD performance. In summary, this study shows how relational risk perception through affecting governance decision modes influence shortened design time.