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Introduction
Manufacturers today are increasingly seeking to partner with independent distributors when entering into new foreign markets, especially if the host market has very different business practices and institutional environment (Arnold, 2000; Ma, 2006; Slater and Robson, 2012; Zhou and Xu, 2012). Such international exchange partnerships allow exporting manufacturers to reduce financial risk and gain access to market information and networks quickly. However, the exchange relationships also create a high level of performance dependency as exporters typically have to delegate their marketing and sales function to the foreign distributors and relinquish important strategic information (Roath and Sinkovics, 2006). Consequently, manufacturers’ ability to effectively manage the partnership is a key determinant of superior export performance (Cavusgil et al., 2004; Skarmeas et al., 2008; Styles and Ambler, 2000). Governance theorists have identified that relational governance and control mechanisms are effective in managing partner relationships and enhancing export performance (Bello and Gilliland, 1997; Griffith et al., 2014; Lee et al., 2008; Leonidou, 2003; Solberg, 2006). Yet, there remain a number of significant research gaps to be filled.
First, the literature has long debated whether relational governance and control mechanisms substitute or complement each other (Yang et al., 2011; Zhou and Xu, 2012). The substitute perspective advocates that one mechanism supplants the need for the other and cautions that potential conflicts may undermine the effectiveness of individual tools (Williamson, 1996; Dyer and Singh, 1998; Uzzi, 1997). The complement perspective argues that the two mechanisms function as complements and should be used in a combined form, given that each has its own advantages and limitations (Cannon et al., 2000; Poppo and Zenger, 2002; Luo, 2007). This study aims to fill in the research gap by identifying conditions that have yet to be examined.
Second, it is imperative to differentiate the two forms of control mechanisms to help explain the mixed findings of the interaction effect of relational governance and control mechanisms. With few exceptions (Heide et al., 2007; Zhou and Xu, 2012), the majority of extant literature treats “control” as a single governance mechanism when examining its interaction effect with relational governance, overlooking the existence of two distinct forms, and their possible divergent intertwined effects with relational governance. In this study, by decomposing...