Opportunism, bounded rationality and governance choices in exploration alliances: the moderating role of boundary spanners' guanxi

PurposeBy distinguishing opportunism-based and bounded rationality-based transaction costs, the study examines how firms use equity/relational governance and boundary spanners' guanxi to govern their exploration alliances in a transaction cost economizing way.Design/methodology/approachThis study used a survey methodology for data collection, and the sample consists of 150 exploration alliances formed by large Taiwanese information and electronic firms.FindingsFindings of this study show that exploration alliances incur considerable transaction costs and require high-level equity control and relational governance. The positive exploration of alliance-equity ownership relationship will be weakened by boundary spanners' guanxi when guanxi serves to harmonize conflicts and mitigate opportunism-based transaction costs, thereby reducing the need for using costly equity ownership to govern exploration alliances. In contrast, the positive exploration alliance-relational governance relationship will be amplified when guanxi becomes a source of legitimacy in the Chinese guanxi institution. This relation-augmenting effect will drive more relational governance because guanxi and relational governance together allow alliance managers to obtain sufficient legitimacy in the formation of a common dominant frame, thereby mitigating bounded rationality-based transaction costs.Originality/valueBy distinguishing various moderating effects of boundary spanners' guanxi and separating transaction costs into two forms, this study contributes to the existing literature as well as advances our understanding of alliance governance decisions in the Chinese business environment.