Improving logistics outsourcing performance through transactional and relational mechanisms under transaction uncertainties: Evidence from China

Although previous studies have extensively examined the effectiveness of the two important control mechanisms in inter-firm relationship management – contracts and relational norms – their relative usefulness under different transaction constraints is still unclear. This study extends existing research on relationship management by exploring the effects of various transaction constraints on the use of contracts and relational norms. It also examines the effects of these two mechanisms on outsourcing performance. The analysis of data from 264 Chinese firms engaged in logistics outsourcing indicates that demand volatility has a negative effect on contracts but has no significant effect on relational norms. Supply volatility exerts an inverse U-shape effect on relational norms, but has no significant effect on contracts. When technology uncertainty prevails, firms are likely to increase their use of either contracts or relational norms. In contrast, when vendor contribution is highly unpredictable, firms will simultaneously reduce their use of contracts and relational norms. Furthermore, although relational norms enhance satisfaction more effectively than contracts, their positive effects on financial performance are not significantly different. These findings enrich relationship management research, especially with regard to control mode selection in situations of transaction uncertainty.