Who we are and how we govern: the effect of identity orientation on governance choice

Abstract

We draw on emerging research in organization theory to suggest how different firm-level identity orientations (individualistic, relational, or collectivistic) impact governance choice. We develop a conceptual framework which focuses on the relationship between a focal firm’s own identity orientation and that of a value chain partner. The framework identifies a series of match and mismatch scenarios, where the latter represent unique governance problems that are not accounted for by existing theory. Some of the mismatch scenarios involve pseudo-matches which resemble convergent orientations between parties, but which actually represent governance problems. Theoretically, our framework advances the governance literature by providing a comprehensive and nuanced account of (1) the orientations that parties bring to bear on a relationship, and (2) how their effects vary depending on the interdependence structure between the parties. We also advance the general literature on identity orientation by connecting it to concrete governance practices, by showing how multiple internal identity orientations create unique internal governance challenges, and by delineating two possible solutions to these challenges. We rely on the framework to develop managerial guidelines for governance choice.