Environmental Change and the Dissolution of Relationships

This study considers how adverse changes in the business environment destabilize business relationships and pre-dispose their dissolution. Employing Macneil’s Theory of Relational Exchange in conjunction with Agency Theory, it examines relational destabilization as a condition that results from the withdrawal or deterioration of relational norms. Findings from a survey of industrial suppliers indicate that the emphasis or lack of emphasis that organizational decision-makers place on reciprocal normative actions differs relative to their interpretation of environmental threat. This is argued to result from one organization’s altered perceptions of a partnering firm’s ability to perform within a new environmental context.