EFFECTS OF RELATIONAL GOVERNANCE ON THE PERFORMANCE OF SELECTED BREWERIES IN SOUTH EAST, NIGERIA

 EFFECTS OF RELATIONAL GOVERNANCE ON THE PERFORMANCE OF SELECTED BREWERIES IN SOUTH EAST, NIGERIA

ABSTRACT

This study was conducted to determine the effect of relational governance on the performance of breweries in South East, Nigeria. This study adopted the survey design. Four selected breweries in the South East, Nigeria were used for the study. A sample size of 724 respondents was obtained from the population of 3048 employees and the distributors of these breweries using Freund and William’s statistical formula. Bowley’s method of proportional allocation was used to determine the allocation of questionnaire. The sources of data for the study were primary and secondary. The main instrument used for primary data was questionnaire, which was structured on five-point Likert scale, and also personal interview. Secondary data were obtained from reviewed relevant literature and the internet. The instrument was checked for reliability and validity using Cronbach coefficient alpha and a value of 0.91 was obtained indicating item consistency. Both the content and face to face validation of the instrument were done by research experts. The data generated from the field survey were presented and analyzed using quantitative method of frequency distribution and simple percentage. The tests of hypotheses were performed using Z-test, ANOVA and Chi-square. The finding revealed that relational governance to a large extent did not positively affect the turnover of breweries in South East, Nigeria; that contractual complexity did not significantly increase the performance of breweries in South East, Nigeria. It was also found that the degree of relational governance significantly increased with the length of time of business interaction; that combining the practices of relational governance and formal contract in inter-organizational business relationship significantly improved the performance of breweries in South East, Nigeria and that contractual governance and relational governance can significantly function as substitutes in exchange performance in breweries in South East, Nigeria. From the findings of this study, therefore, it was affirmed that relational governance approach can be beneficial for the effective performance of organizations as it enables goodwill, trust and is beneficial to all stakeholders in inter-organizational business relationship. The study recommends that relational governance approach should be adopted in inter-organizational or inter-personal business relationships where interacting parties have interacted quite some time and proved trustworthy to each other. A combination approach, whereby formal contract and relational governance can jointly be applied in inter-organizational business relationship, is commendable.

CHAPTER ONE

INTRODUCTION

1.1              Background of the Study

Different views have been expressed regarding how corporate organizations should achieve corporate advantage. For Chow et al (2005) and Dyer (1995) corporate organizations cannot just commence the exercise of the proprietary advantage. They hold, rather, that to enhance their ability to compete, they must work at the complex and sometimes delicate task of establishing corporate relationships with other suppliers. Relating the same view to making foreign direct investment, Chow et al (2005) citing Buckley et al (1976) and (Dyer, 1996) opine that manufacturing firms making foreign direct investments cannot simply enter foreign countries and commence the effortless exercise of their proprietary advantage. Rather, to enhance their ability to compete, they must work at the complex and sometimes delicate task of establishing cooperative relationships with suppliers in host countries. This presents the concept of the inevitability of interaction in organizations.

Organizational interaction is inevitable because organizations are viewed as open systems where objects in their environments influence the behavior of the system’s part and the relationships among its parts. This is because open systems interact with their environment for the procurement of both inputs and economic resources and to satisfy other needs, which are essential for their survival (Onwuchekwa, 1993). The implication of this is that organizations cannot be completely isolated from their environment. How this interaction should be initiated and sustained for the benefits of the interacting organizations becomes a matter of concern as often duplicity comes into play due to the greed of some business partners’ intention to outsmart each other.

This hazardous situation brings up the question regarding the sort of governance arrangement that should be put in place to checkmate business opportunists, who capitalize on the ignorance of their business associates or partners. Poppo et al (2002), therefore, forward the view that transaction cost economics (TCE) has emerged as a common framework for understanding how managers craft governance arrangements. Williamson (1991) holds the proposition that managers align the governance features of inter-organizational relationships to match known exchange hazards, particularly those associated with specialized asset investments, difficult performance measurement or uncertainty. In response to exchange hazard, managers may craft complex contracts that define remedies for foreseeable contingencies or specify processes for resolving unforeseeable outcomes……

 EFFECTS OF RELATIONAL GOVERNANCE ON THE PERFORMANCE OF SELECTED BREWERIES IN SOUTH EAST, NIGERIA