Contract Formalization and Governance of Exporter–Importer Relationships

Exporting relationships between manufacturers and foreign importers pose unique coordination problems because, on the one hand, transactions are recurrent and both firms make non‐trivial relationship‐specific investments, but at the same time, the exchange partners maintain separate legal entities with individual profit claims. This study examines the role of contracts as a governance mechanism in these relationships that are neither market‐based discrete transactions, nor can be governed through ownership‐based hierarchies. Drawing upon recent research on contract law and interorganizational relationships, we develop and empirically test a model that incorporates both the antecedents and performance implications of the nature of contract governing exporter–importer relationships.