Bilateral, Collective, or Both? Formal Governance and Performance in Multisourcing

Abstract

While multisourcing offers benefits such as access to best-of-breed resources and enhanced competition, it also presents clients with a new governance challenge, namely the need to ensure that vendors not only deliver their individual contributions but also collaborate to produce a coherent joint outcome. Clients can address this challenge by combining bilateral governance focused on each vendor’s individual performance with collective governance aimed at the vendors’ joint performance. However, it is unclear how the simultaneous application of bilateral and collective governance affects multisourcing performance. Indeed, the literature falls short in systematically differentiating these governance mechanisms and empirically examining their interplay. Drawing on existing work on multisourcing and on the outsourcing governance literature, we argue that bilateral and collective governance direct efforts toward different performance dimensions (individual vs. joint), invoke different metaphors (market vs. team), and promote conflicting norms (competitive vs. cooperative), which can result in trade-offs when bilateral and collective governance mechanisms are combined. Results from a survey of 189 multisourcing arrangements support our expectation that bilateral and collective governance promote different performance dimensions. Notably, one collective governance mechanism, conflict management procedures, contributes to both individual and joint performance. We find substitutional effects between bilateral and collective governance in relation to joint performance but not individual performance, indicating that the benefits of collective governance for joint performance are more easily compromised than the benefits of bilateral governance for individual performance. We also observe complementary effects within collective governance mechanisms. Our key contribution lies in theorizing and empirically examining the effects and interplay of bilateral and collective governance in multisourcing.