Performance measures and relationship development in a bilateral governance structure

New organisational forms, including strategic partnerships and networks, are replacing simple market-based transactions and traditional, bureaucratic, hierarchical organisations (Webster, 1992). The shift in the way marketing is being organised is accompanied by both environmental and structural changes (Morgan and Hunt, 1994; Palmer, 2000; Investor Digest, 2001 ). This new emerging paradigm of thought argues that it is more important to focus on the development and management of relationships than on discrete transactions (Ford, 1980; IMP Group, 1982; Webster, 1992; Gronroos, 1994a, 1994b, 1995, 1997a, 1997b; Berry, 1995). These business-to-business buyer-seller trading interactions have been revealed to take place under a variety of governance structures (Bradach and Eccles, 1989; Heide, 1994 ), with each one undergoing different stages of development (Dwyer et al., 1987). Despite this overall agreement, existing relationship marketing literature appears silent regarding the deciding factors that determine whether or not a business relationship is continued. More specifically the literature appears to lack any information and normative guidelines as to the relative importance of criteria when assessing the performance of a business relationship (i.e., the relative importance of performance criteria within and between relationship development stages). Consequently, this study examined the bilateral governance structure, business relationship development stages and performance measures in relationship marketing. A conceptual matrix framework was developed with the most representative performance measures in the framework being operationalised. The framework was tested with the aid of self-completion questionnaires in the UK manufacturing sector, the study setting, which has been achieved through a positivist empirical situational study in the form of scenarios. The findings provided an original contribution to academia through an evaluation of the relative importance of performance measures as deciding factors in furthering the development of a business relationship within a bilateral governance structure. For example, there was differential importance of evaluation criteria within and between stages. Within all the stages trust was significant, whilst only commitment and transaction-specific asset investments were significant within the initiation stage; opportunistic behaviour was significant within the monitoring and termination stages; and distance within the initiation and monitoring stages. When moving from the initiation to monitoring stage, commitment and distance were significant. In addition, distance was also significant when moving from the monitoring to termination stages, and when moving from the initiation to termination stages, commitment and opportunistic behaviour were significant. In addition, a contribution has been made to business practice, through the development of normative managerial guidelines to aid decision-making when moving forward or not along the relational continuum under a bilateral governance structure. For example, trust was found to be a significant determinant for all stages of the business relationship and remains constant across all these stages. This implies that suppliers, whether potential or existing, should attempt to demonstrate high levels of trust at all stages of a business relationship. This can be achieved by different actions in different stages of the business relationship.