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Eucheuma Seaplant Value Chains and SME Alliances
SEAplant.net Technical Monograph No. 0804-6a

Types of relationship and transaction governance

Page 13

The decision tree on page 12 categorizes eight types of relationship governance. They can be described as follows:

1.	Trusting relationship
	Trust/commitment governance systems take primacy over legal and hierarchical forms of governance. The strategic business alliance is fundamentally a trusting relationship. Pages 25-26 present a matrix that facilitates an intuitive appreciation of how trusting business relationships function.
2.	Ephemeral relationship
	Tend to be arm’s-length, brief and virtually independent of business-to-business (B2B) governance. An example is the spot-purchase of “as-is-where-is” goods by one party from another party previously unknown to them.
3.	Gang relationship
	Strong trust and hierarchical governance but weak legal governance. Examples include businesses operating outside the law and led by “Godfather” figures.
4.	Authoritarian relationship
	Governed by a strong hierarchy but involves low levels of trust or legal governance. An example is an ad hoc subcontracting arrangement between a prime contractor and a short-term subcontractor.
5.	Egalitarian relationship
	Strong legal and trust governance but high degree of authority delegation and weak hierarchy. Examples include firms that are adopting “disaggregation” as in the case of the “spaghetti organization” (Foss, 2000).
6.	Financial relationship
	High level of legal governance but weak governance via trust or hierarchical mechanisms. An extreme example is the purchase of shares by a day-trading speculator.
7.	Robust relationship
	Strong governance of all types including legal, hierarchical and trust. Examples include the most successful and investment-worthy firms. An example of a robust business organization is General Electric as operated and described by Jack Welch (2001).
8.	Impersonal relationship
	Units bound by stringent legal and hierarchical structures but trust is weak. The work of Dean et al (1998) on organizational cynicism elucidates the characteristics of organizations with this combination of relationship governance.

The decision tree on page 12 categorizes eight types of transaction governance. They can be described as follows:

1.	Trusting transactions
	Trust governance systems predominate as in a “handshake transaction”. May involve tangible and/or intangible media of exchange.
2.	Brief, infrequent transactions
	Examples are one-time-transactions concerning supplies or services. Generally involve tangible media of exchange.
3.	Imposed transactions
	Similar to forced transactions except that the element of trust enables the use of either tangible or intangible media of exchange.
4.	Forced transactions
	Governed by a strong hierarchy but involve low levels of trust or legal governance. Such transactions typify the attitude expressed by “make him an offer he can’t refuse”. Limited to tangible media of exchange.
5.	Voluntary transactions
	Essentially trusting agreements with “papers – just in case”. May involve tangible and/or intangible media of exchange.
6.	Arm’s length transactions
	Dominated by legal governance and generally involving tangible media of exchange. An example is the purchase of titled or guaranteed goods or property in exchange for cash. Limited to tangible media of exchange.
7.	Secure transactions
	Strong governance of all types makes transactions as secure as humanly possible. May involve tangible and/or intangible media of exchange.
8.	Impersonal transactions
	Bound by stringent legal and hierarchical structures without dependence on trust. An example is temporary employment of a contractually bound employee by a large company. Limited to tangible media of exchange.