Conflict Dynamics in Interfirm Relationships: An Exploratory Analysis of the Importance of Governance Mechanisms

Abstract

The level of conflict present in interfirm relationships largely determines the partners’ ability to realize relationship performance goals because conflict can create costs that substantially decrease or even exceed cooperation benefits. Although scholars have called emphatically for studying the dynamics of conflict, empirical investigations of interorganizational conflict development are scarce. Consequently, we explore the evolutionary dynamics of conflict in interfirm relationships, for what is ostensibly the first time based on all the five sequential states of conflict as proposed by the “dominant process model” (Pondy 1967). We argue that the selection and implementation of formal as well as relational governance mechanisms are central drivers of conflict transitions. Therefore, on the basis of extensive longitudinal data from retailers of Germany’s two largest grocery chains, our exploratory analyses examine conflict from a process perspective and provide insights into the relative importance of governance mechanisms over the conflict “lifecycle”.