Complementarity effect of governance mechanisms on environmental collaboration: does it exist?

Abstract

This study evaluates the effect of pre-existing relational governance mechanisms on environmental collaboration. Specifically, our study distinguishes between structural and process dimensions of relational governance mechanisms so as to facilitate a more nuanced investigation into the inherent complementarities and performance implications. Using data collected from 145 US firms and a combination of methodologies – three-stage least squares and structural equation modelling, a number of direct, complementary and mediation effects are hypothesised and tested. The three-stage least squares methodology was adopted to overcome endogeneity and simultaneity issues inherent in the hypotheses covering complementarity. Contrary to conventional wisdom, structural and process governance mechanisms were not found to act as complements for environmental collaboration. Instead, the effect of structural mechanisms was found to be completely mediated by the process mechanisms. Thus, process mechanisms of relational governance were found to be much more important in promoting advanced practices such as environmental collaboration. Our results also document the significant mediating role of environmental collaboration. Implications for future research and practice are offered.

Keywords:

• structural governance mechanisms
• process governance mechanisms
• environmental collaboration
• environmental performance
• social performance
• three-stage least squares

Acknowledgement

The authors would like to thank the University of North Florida and the Institute for Supply Management (ISM) for their financial and administrative support of this research.

Notes

1. Past studies conceptualise relational governance as a set of long-term-oriented behaviours that extend beyond mere market mechanisms (e.g. Lado, Dant, and Tekleab 2008; Li and Dant 1997). This conceptualisation addresses the structural dimension of relational governance. But, the notion of relational governance must include both the structural and the process dimensions (Zaheer and Venkatraman 1995). Therefore, this study includes both structural and process dimensions of relational governance. Such an all-encompassing definition enables us to completely describe the complexity inherent in interorganisational relationships than either structural or the process dimension alone could.