Relational governance is the management of a business relationship through trust, shared norms and the expectation of future dealings, rather than legal enforcement. It usually works alongside formal contracts and helps partners adapt when circumstances change.
Table of Contents
Types of inter-firm governance
- Contractual governance: formal, legally enforceable contracts that set roles, controls and penalties.
- Relational contracts: written, enforceable agreements left open-ended, so partners can adjust them as things change.
- Relational governance: unwritten trust and norms that hold because both sides value the relationship.
Key factors
- Contracts and trust together. Studies find the two usually reinforce each other. Firms with detailed contracts also tend to report more trust.
- What the contract is for. Control clauses signal distrust and erode goodwill. Clauses that set roles, information sharing and joint problem solving build trust in each other’s competence.
- Depth of collaboration. Trust matters most where partners create value closely together, as in innovation ecosystems. Transaction-based ecosystems rely more on formal rules.
- Credibility and clarity. Partners need a goal none can reach alone, repeated contact and a shared technical understanding.
Examples
Renault. The Renault-Nissan alliance long rested on cross-shareholdings and one chairman for both firms, until his arrest in 2018. After years of tension the partners rebalanced it in 2023, cutting Renault’s 43% stake in Nissan to 15%, matching Nissan’s stake in Renault. In March 2025 they loosened ties again, allowing each to fall to 10%.
Ocado. Kroger, the US grocer, partnered with Ocado in 2018 to run automated warehouses, planning 20 sites. When Kroger decided in late 2025 to close three and cancel another, it agreed in December 2025 to pay Ocado a one-off $350 million, mainly in place of future fees due under their contract. Contractual governance protected Ocado as the relationship cooled.
Frequently asked questions
What is the difference between relational governance and a relational contract?
A relational contract is a written, legally enforceable agreement left open so partners can adapt it. Relational governance rests on unwritten trust and norms that no court enforces.
Can trust replace a contract between firms?
Rarely. Research since Poppo and Zenger’s 2002 study finds contracts and trust usually work together, with the contract setting a baseline and trust handling what the contract could not foresee.
How do firms build relational governance?
Through repeated dealings, open sharing of information, joint problem solving and keeping promises even when the contract would allow otherwise. Each kept promise raises the value both sides place on the relationship.
Does relational governance work across a whole ecosystem?
The evidence is thin. A review of research from 1990 to 2018 found that 78% of studies looked at pairs of firms and under 2% at networks, so its effect across many partners is largely untested.
Related concepts
Ecosystem Governance
Transaction Costs
Multilateral Relationships