Governance packages and sub-unit relationships in a dyadic setting - The case of a Nordic sales cooperation

Abstract: This paper describes a relationship between two firms in the store equipment industry that consists of different sub-unit relationships. The study aims at identifying how the presence of such sub-unit relationships affects the governance package in place to manage the overall relationship and what affects the ability to balance between enabling and controlling uses of controls in such a governance package. This is investigated through conducting a case study where the control tools and control patterns in the case relationship are investigated through the lens of compound theory (Ross and Robertson 2007). We find that the presence of sub-unit relationships does not necessarily cause any effects with regards to the control tools or patterns found within the governance package. However, the controls found are shown to have different effectiveness and mode of function for the different sub-unit relationships. This effect was primarily found in relation to social controls that have emerged over the years of cooperation. In relation to the ability to balance between enabling and controlling uses of the controls in a governance package, this study shows how Mundy's (2010) concepts are applicable in an inter-organizational setting if not only the use of imposed controls but also the employment of emerged social controls is taken into account. We further find that the interface between the two case firms was to a large degree dependent on specific individuals. As a result the ability to balance between enabling and controlling uses and employment of controls in these sub-unit relationships was also found to be affected by the degree to which such key persons disperse control practices from one sub-unit relationship to another and absorb the resulting tensions.