Inter-organizational relationships and firm performance: A study of the US equity underwriting market in the investment banking industry

The debate on how firms govern their inter-organizational relationships to foster their business performance is far from being settled. While several arguments suggest both transactional and relational mechanisms may act as complementary or substitutive forces, this paper explores and demonstrates how both mechanisms can be jointly exploited to enhance performance. Adopting the context of the US equity underwriting market, this paper reveals that an issuer adopting a transactional governance mechanism to manage its inter-organizational relationships with underwriters obtains a lower cost offering (cost performance) but may not entail price premium (price performance) of that offering. In contrast, an issuer taking a relational governance mechanism has superior price performance but worse cost performance. Nevertheless, this paper uncovers that an issuer adopting a synthesized mechanism obtains better cost performance and price performance by leveraging the advantages from both of the transactional and relational mechanisms.