The efficacy of relational governance and value-creating relational investments in revenue enhancement in supplier–buyer relationships

Abstract

The paper integrates and extends insights from relational exchange theory and value exchange model to discuss the efficacy of relational governance and value-creating relational investments to affect certain revenue-enhancing (relational) behaviours. It is postulated that value-creating relational investments made in a highly relational environment successful enough to engender high relationship quality (manifested through total partner satisfaction and inter-organizational trust) result in higher interorganizational commitment. This commitment ultimately translates into superior performance of the focal firm since partners exhibit revenue-enhancing behaviours like longevity of relationship, increased business share, positive word-of-mouth and reduced partial defection. It is further argued that the dynamics of model may vary across different phases of relationship life cycle and are moderated by the nodes’ relational polygamy.