Governance in Exchange: Contract Law and Its Alternatives

Abstract

Conceptual debate centering on the efficacious nature of contract law for regulating exchange has prompted recent emphasis on alternative modes of governance. The emergence of this interest has been bolstered in marketing through current focus on exchange relationships versus transactions. Scholars in both marketing and law are examining the use of varying forms of integration, self-interest stakes (i.e., credible commitments), social norms, ethics, effects of reputation, and other governance elements. The authors examine this trend and empirically investigate factors relating to the use of different governance approaches and their interrelationships. In particular, a simulated channel environment is used to test hypotheses relating to the effect of environmental uncertainty, relational interaction, and the interrelationship of different governance mechanisms (i.e., hierarchical authority and social norms). The authors report on the conceptual foundations and methodology underlying this research along with key results and implications for public policy and marketing. Their findings provide insight for informing policy underlying contract law and antitrust.