INTERIMISTIC RELATIONAL EXCHANGE:

CONCEPTUALIZATION AND PROPOSITIONAL DEVELOPMENT

C. Jay Lambe
Assistant Professor of Marketing
Texas Tech University
Lubbock, TX 79409
806-742-3434
jlambe@coba.ttu.edu

Robert E. Spekman
Tayloe Murphy Professor of Business Administration
Darden Graduate School of Business
University of Virginia
Charlottesville, VA 22906-3550
804-924-4860
SpekmanR@Virginia.edu

Shelby D. Hunt
The J.B. Hoskins and P.W. Horn
Professor of Marketing
Texas Tech University
Lubbock, TX 79409
806-742-3436
sdh@ba.ttu.edu

Revised October 1999

The authors are grateful for the financial assistance provided by the Darden Foundation. Also,
we would like to thank the editor and three anonymous reviewers for their extremely helpful
comments. In addition, we would like to thank Mike Wittmann, a doctoral student at Texas Tech
University, for his help during the project. Please refer all correspondence to Jay Lambe,
Assistant Professor of Marketing, Texas Tech University, Lubbock, TX 79409, 806-742-3434
(jlambe@coba.ttu.edu).
 INTERIMISTIC RELATIONAL EXCHANGE:
CONCEPTUALIZATION AND PROPOSITIONAL DEVELOPMENT

Abstract

Research on relational exchange has focused primarily on long-term, or "enduring," relational

exchange. The evolutionary model of relationship development that is the foundation for much of the

research on enduring relational exchange lacks applicability for short-term, or "interimistic,"

relational exchange. Interimistic relational exchange is defined as a close, collaborative, fast

developing, short-lived exchange relationship in which companies pool their skills and/or resources

to address a transient, albeit important, business opportunity and/or threat. Because interimistic

exchange relationships must quickly become functional and have a short life, these relationships have

less time to fully develop the relational governance mechanisms assumed in the evolutionary model

fashion. Therefore, interimistic relational exchange appears to rely more on non-relational

mechanisms than does enduring relational exchange. This article (1) examines how interimistic

relational exchange governance differs from that of enduring relational exchange and (2) develops

propositions for further research on interimistic relational exchange.

 INTERIMISTIC RELATIONAL EXCHANGE:
CONCEPTUALIZATION AND PROPOSITIONAL DEVELOPMENT

I used to tell people that Internet years were like dog years. These days I feel as if Internet months
are like dog years. The rate of change is stunning.
-- Dan Rosen, Senior Director of Microsoft Network (Lyons 1996, p. 2,3)

Business-to-business exchange of the “relational” (Macneil 1980) kind has special appeal to

marketing researchers. At least since the works of Kotler (1972), Bagozzi (1975), and Hunt (1976),

definitions of the process of marketing have been focused on exchange, which requires the

establishment of some form of an exchange relationship between parties (Dwyer, Schurr and Oh

1987; Varadarajan and Cunningham 1995). Indeed, as business-to-business exchange has become

increasingly relational in nature, some researchers argue that a paradigm shift from transactional to

relational exchange is occurring (Day 1995; Kotler 1991; Parvatiyar, Sheth, and Whittington 1992;

Varadarajan and Rajaratnam 1986; Webster 1992). This conclusion is reflected in a growing body of

marketing research that focuses on relational, business-to-business exchange relationships (e.g.,

Dwyer, Schurr and Oh 1987; Gundlach and Murphy 1993; Morgan and Hunt 1994).

Research on relational exchange suggests that a key mechanism that enables such exchange to

create value, or that "governs" exchange, is the nature of the relationship. Thus, the development of a

relationship whose nature has certain attributes is prerequisite to functional relational exchange.

Specifically, such a relationship has high levels of such “relational” attributes as trust and

commitment (e.g., Morgan and Hunt 1994). Research indicates that these relational attributes are

developed through various stages over an extended period of time (Anderson and Weitz 1992;

Dwyer, Schurr, and Oh 1987; Hakansson 1982; Hallen, Johanson, and Seyed-Mohamed 1991;

Wilson 1995). Indeed, it can take up to four years for exchange partners to establish working norms

(Spekman et al. 1994). Therefore, what might be called the “evolutionary model” of the process of
 2

developing relational exchange suggests that high levels of relational exchange attributes are based

on each partner’s historical, long-term view of the exchange relationship as it has developed through

exchange episodes during the stages of relationship development. Most research has tended to focus

on long-term or "enduring" relational exchange (hereafter, ERE), in which there is sufficient time for

relational exchange to emerge in evolutionary fashion.

In contrast, there is little research on short-term relational exchange even though numerous

examples of such exchange relationships exist1. Although these short-term exchange relationships

have little time to develop, they are genuinely relational because they exhibit high levels of

cooperation and collaboration (Wilson 1995). We call these exchange relationships “interimistic”

relational exchange (hereafter, IRE) because of their interim nature2. IRE is a close, collaborative,

fast developing, short-lived exchange relationship in which companies pool their skills and/or

resources to address a transient, albeit important, business opportunity and/or threat. In IRE,

relational exchange occurs in a context where there is a high-level of time pressure to develop the

relationship, and the expectation of future transactions is reduced.

The paucity of research on IRE presents difficulties because "the dynamics of shorter

relationships are different than those of longer relationships... [due to the fact that] longer

relationships are qualitatively different than shorter ones, [therefore] there is value in research that

focuses specifically on either type of relationship in order to understand better the dynamics of each"

(Grayson and Ambler 1999, p. 139). In the case of IRE we argue that its exchange dynamics differ

from that of ERE, because its short life makes the evolutionary model approach to relationship

development less applicable. That is, ceteris paribus, IRE: (1) provides the exchange partners less

time than does ERE to develop relational attributes in evolutionary fashion based on the given

relationship's exchange history, which (2) causes certain relationship elements considered necessary
 3

for functional relational exchange to exist at lower levels in IRE than in ERE and, thus, (3) forces

firms in IRE to rely more on non-relational governance mechanisms than those in ERE. Therefore,

this paper examines how urgency, or time pressure, to address a business situation affects the

development of a functional exchange relationship in IRE.

As a preliminary issue, however, it is important to note that our paper focuses on the time

available for relationship-building interactions, not on the quality of the interactions that occur. The

relational exchange literature provides (at least) three reasons for focusing on time (at least at this

stage of theory development). First, though time in a relationship does not ensure relationship-

building interactions, it does limit, or bound, the number of interactions that can occur, high quality

or otherwise. Thus, less time allows for fewer relationship-building interactions, which restricts the

degree of relationship development. For example, Nevin (1995, p. 332) notes that early in an

exchange relationship firms' interactions are restricted to "initial contracting agents" and are

dominated by the substantial early issues that must be addressed to get the exchange off the ground.

However, longer lasting relationships allow firms the time needed to get more individuals involved in

the exchange relationship, and expand the number of norm-building interactions (Spekman et al.

1994). Second, research suggests that both the quality and quantity of interactions are important for

relationship development. For example, research on one form of exchange interaction,

communication, indicates that a key to relational exchange is both the frequency of communication

and quality of communication (Mohr and Nevin 1990). As Weitz and Jap (1995, p. 314) note,

"channel members who seek to restrict the relationship's development would tend to act in a

restrained, polite manner, restrict the range of topics appropriate for discussion, and limit the

frequency [emphasis added] of meetings." Third, "time-compression diseconomies" (Dierickx and

Cool 1989) with respect to quality interactions occur in relationship development when exchange
 4

relationships must develop quickly. In such relationships, Wilson (1995, p. 336) observes that the

"stressful environment of relationship acceleration, ...[provides] less time for the participants to

carefully explore the range of long-term relationship development." One example of such an

exploration would involve time-consuming "tests" of exchange partners:

In a channel relationship, a buyer might use an "endurance" test such as a decrease in

purchases to gauge the depth of the distributor's commitment. Alternatively, the buyer might
use a "triangle" test, in which a situation is created that involves a real or hypothetical
alternative supplier that could replace the present supplier. This test allows the buyer to assess
the supplier's loyalty to the relationship. A "separation" test may occur when the buyer
discontinues contact for a period of time in order to monitor whether and when the supplier
initiates interaction with the buyer. (Weitz and Jap 1995, p. 314)

Our article is organized as follows. We begin by reviewing the literature on relational

exchange, with a focus on relationship attributes and development. The review shows that the

literature has implicitly emphasized ERE, leaving a gap with respect to IRE. Then, we develop

propositions involving key relationship attributes and relationship development in IRE. These

propositions, which show how firms engaged in IRE utilize non-evolutionary model mechanisms to

ensure functional exchange, provide an agenda for future research. We end with some tentative

conclusions and offer suggestions for future research.

THE NATURE OF RELATIONAL EXCHANGE

The study of relational exchange was initiated by researchers who began to explore a form of

business-to-business exchange that represented a departure from the type of exchange that had

dominated scholarly effort to that point, i.e., arms-length, transaction-oriented, adversarial exchange

(Adler 1966; Arndt 1979; Hakansson 1982; Varadarajan and Rajaratman 1986). In a work that

strongly influenced research in this new stream, Macneil (1980) developed a multidimensional

typology of business exchange that differentiated traditional, arms-length business exchanges, which

he deemed as "transactional" or discrete, from a new form of exchange that he named "relational."
 5

In relational exchange, partners rely heavily on “relational contracts” to govern the exchange

process (Macneil 1980). Such relational contracts are used when it becomes difficult for the involved

parties to spell out the critical terms of a formal written contract (Goetz and Scott 1981). Indeed, the

contract to the exchange becomes more relational as exchange contingencies and duties become less

codifiable (Gundlach and Murphy 1993; Nevin 1995). To achieve the flexibility required in complex

exchanges where there are unforeseen circumstances, relational exchange is marked by high levels of

cooperation, joint planning, and mutual adaptation to exchange partner needs (Gundlach and Murphy

1993; Hallen, Johanson, Seyed-Mohamed 1991; Nevin 1995). Relational exchange is motivated by

the mutual recognition that the outcomes of such exchange exceed those that could be gained from

other forms of exchange or exchange with a different partner (Anderson and Narus 1984, 1990;

Dwyer, Shurr, and Oh 1987; Nevin 1995).

Significant research efforts have been directed at the strategic use of relational exchange

(Gomes-Casseres 1987; Harrigan 1985a, 1985b, 1986, 1988), motivations for relational exchange

(Heide and John 1990; Kogut 1988a, 1988b), the governance of relational exchange (Heide and John

1988, 1992), key relationship attributes of relational exchange (Ganesan 1994; Morgan and Hunt

1994), and the process of relationship development (Anderson and Weitz 1992; Dwyer, Schurr, and

Oh 1987; Wilson 1995). Given our objective, we focus on the last two categories.

Research on Functional Relational Exchange

In relational exchange, the relationship is a critical governance mechanism and, therefore, a

key determinant of relational exchange success. Simply put, functional relational exchange, i.e.,

exchange where relational contracts are highly effective, requires a functional relationship, i.e., a

relationship that has high levels of such relational attributes as trust and commitment that help govern

the exchange (Anderson and Narus 1984, 1990; Day 1995; Dwyer, Schurr, and Oh 1987; Heide and
 6

John 1992; Morgan and Hunt 1994; Wilson 1995). Thus, recognizing the centrality of the

relationship, researchers have attempted to pinpoint relationship attributes that must exist to ensure

functional relational exchange, including: commitment (Anderson and Weitz 1992; Ganesan 1994;

Morgan and Hunt 1994), trust (Moorman, Deshpande, and Zaltman 1992, 1993; Morgan and Hunt

1994), communication (Anderson and Narus 1990; Mohr and Nevin 1990), cooperation (Anderson

and Narus 1990; Morgan and Hunt 1994; Stern and El-Ansary 1992), mutual goals (Heide and John

1992; Morgan and Hunt 1994), norms (Heide and John 1992), interdependence (Anderson, Lodish,

and Weitz 1987; Anderson and Narus 1984, 1990; Hallen, Johanson, Seyed-Mohamed 1991), social

bonds (Han, Wilson, and Dant 1993; Wilson 1995), adaptation (Hakansson 1982; Hallen, Johanson,

Seyed-Mohamed 1991), and performance satisfaction (Dwyer, Schurr, and Oh 1987; Mohr and

Spekman 1994; Wilson 1995).

Research on relational exchange has also examined how these necessary relationship

attributes are developed – or, in other words, the process by which functional relationships are

developed. The preponderance of research views relationship development in relational exchange as a

long-term, evolutionary process that is driven by intra-exchange relationship interactions between the

partners over time (Anderson and Narus 1984, 1990; Anderson and Weitz 1992; Dwyer, Schurr, and

Oh 1987; Hakansson 1982; Hallen, Johanson, and Seyed-Mohamed 1991; Heide and John 1992;

Morgan and Hunt 1994; Spekman et al. 1996; Ring and Van De Ven 1994; Wilson 1995). In most

cases, either explicitly or implicitly, these works rely on social exchange theory (SET) (Homans

1958; Thibault and Kelly 1959) to explain how firms are able to develop relationship variables (such

as trust, cooperation, and commitment) to an extent where the partners can work together to make

relational exchange successful.

 7

For example, Dwyer, Schurr, and Oh (1987) suggest that buyer-seller relationships develop

through buyer/seller interactions over an extended period of time. They argue that, as positive social

and business outcomes occur, the partners develop relationship norms and become more dependent

upon each other. Through these interactions, the firms in the exchange relationship pass through the

relationship development stages of awareness  exploration  expansion before entering the

commitment stage where the relational exchange attributes are highly developed. Similarly, Wilson

(1995) proposes a process of relationship development in which exchange partners, through their

interactions, develop such essential variables as trust. These attributes then act as a foundation for

higher-level relationship variables, such as mutual commitment.

Temporally Bifurcating Relational Exchange

With respect to the exchange continuum suggested by Macneil (1980), all exchange

relationships with a significant relational element are customarily lumped together as a monolith,

"relational exchange". Thus, though Macneil’s (1980) typology views exchange as continuum, there

has been little explicit examination of the relational continuum that exists within the presumed

"relational exchange" category3. Since most exchange has at least some relational content, the need

for research that examines relational exchange based on the degree of relationalism is warranted. As

noted by Dwyer, Schurr, and Oh (1987, p. 12, 14):

[D]iscrete exchange is idealized fiction...[E]ven the simplest model of discrete exchange must
postulate what Macneil (1980) calls a 'social matrix': an effective means of communication, a
system of order to preclude killing and stealing, a currency, and a mechanism for enforcement
of promises. Hence, some elements of a 'relationship' in a contract law sense underlie all
transactions.

Given that the exchange continuum implies that relational exchange can be "more" or "less"

relational, theorizing on the sources and consequences of such dispersion is needed. Therefore, a

fundamental research question is: what are the variables that affect the degree of relationalism
 8

exhibited by firms engaged in relational exchange? We propose that time pressure is a temporal

variable that makes it more difficult and less desirable for firms to engage in relational exchange in

its fullest sense. Because time pressure makes exchange less relational, we suggest that relational

exchange be bifurcated into short-term and long-term relational exchange (or IRE and ERE,

respectively).

Figure 1 illustrates the bifurcation that we suggest. The continuum is based on Macneil's

(1980) conceptualization of exchange. The left side of the continuum represents transactional

exchange, the least relational of all exchange. The right side of the continuum represents relational

exchange, the most relational of all exchange. The literature has already bifurcated transactional

exchange into discrete (one-time, or "one shot") exchange and repeated transactions (Webster 1992).

Although both forms of exchange are highly unrelational, repeated transactions are more relational

than discrete because firms have a greater opportunity to develop a relationship. We suggest that a

similar bifurcation exists for the right side of the continuum, relational exchange, with IRE being less

relational than ERE because IRE allows for fewer interactions.

[Insert Figure 1 About Here]

Thus, although IRE is a form of relational exchange because it requires relatively high levels

of cooperation, adaptation, and joint planning, the expected short life of IRE creates time pressure

that makes it less relational than ERE. Because the exchange parties have limited time together, they

are forced to eliminate, or accelerate, the evolutionary process of relationship development. The time

compression diseconomies caused by IRE's expected short life stunt relationship development

because they reduce the ability of the exchange parties to “view the relationship in terms of its

history” (Dwyer, Schurr, and Oh 1987, p. 12), and reduce the parties' expectation of a future

"mutuality of interest” (Heide and John 1992). In other words, partners have less time for the
 9

evolution of relational attributes (such as trust and commitment) and relationship-specific norms

(such as reciprocity). Indeed, Lusch and Brown (1996) show empirically that exchange relationships

that have a “long-term orientation” exhibit more relational behaviors than those that do not.

For example, during the advent of the personal digital assistant industry, Hewlett-Packard and

Lotus formed an exchange relationship to create quickly (16 months) a personal digital assistant,

which required that they "collaborate extensively," "work together smoothly," and manage their

relationship in such a fashion as to "maximize the benefits of collaboration" (Gomes-Casseres and

Leonard-Barton 1994, p. 37, 39). However, the same first-to-market time pressure also caused a high

degree of market uncertainty that "made the commitment ...to each other less deep" (p. 46).

Because IRE is less relational than ERE, we theorize that, compared with ERE, the

development of functional IRE is less reliant on relational governance and more reliant on non-

relational governance. Thus, it would seem that transaction cost analysis (TCA) (Coase 1937;

Williamson 1975, 1994) would play a significant role in explaining functional IRE because TCA is

used to explain non-relational exchange governance.

TCA views firms and markets as alternative forms of governance and suggests that exchange

governance is driven by firms’ desire to minimize the direct and opportunity costs of exchange, i.e.,

"transaction costs" (Williamson 1975). Guided by its goal of transaction cost minimization, TCA

attempts to explain why firms choose to use certain exchange relationship governance mechanisms

based on the governance problem faced (Rindfleisch and Heide 1997). Governance problems, such as

safeguarding relationship assets (Heide and John 1988) and/or ensuring partner adaptation (Heide and

John 1990), can be thought of as TCA’s independent variables (Rindfleisch and Heide 1997).

Governance mechanisms, such as vertical integration (Williamson 1975) or “pledges” (Anderson and

Weitz 1992), can be thought of as TCA’s dependent variables (Rindfleisch and Heide 1997).
 10

A basic premise of TCA is that the risk of partner opportunism limits the effectiveness of

relational governance. However, several researchers have shown that, indeed, relational control in the

form of norms or personal relations is often an effective means of governance (e.g., Anderson and

Narus 1984, 1990; Dwyer, Schurr, and Oh 1987; Morgan and Hunt 1994; Wilson 1995). In addition,

doubt has been cast on TCA’s assumption of universal opportunism, especially in relational exchange

(e.g., Heide and John 1992; Morgan and Hunt 1994). Thus, TCA is limited in its capacity to explain

exchange governance in exchange relationships in which the partners are able to develop

relationship-based governance over time. Therefore, researchers of relational exchange have

increasingly drawn on social exchange theory (SET), whose core explanatory mechanism is the

relational contract that develops over time through the interactions of the exchange partners (Dwyer,

Schurr and Oh 1987; Hallen, Johanson, and Seyed-Mohamed 1991).

SET, though, has its own limitations, not the least of which is that, though theorists argue that

relational contracts may serve as substitutes for formal contracts or direct control, the empirical

evidence is limited and mixed (Rindfleisch and Heide 1997). For example, Heide and John (1992)

show that relational norms by themselves have no effect on buyer control. Rather, relational norms

act as a moderator of the link between dependence and control in exchange relationships. In addition,

others have argued that contracts or direct control are necessary to serve as a “safety-net” should the

relational contract temporarily fail -- which they might given the uncertainty in IRE (Ring and Van

De Ven 1994). Consequently, one can argue that SET and TCA are complementary: both can help us

understand certain aspects of relational exchange. Because one is not forced into an “either – or”

situation, the question is not which theory to use, but to what degree and when one should use each

theory. Thus, our propositions draw on both SET and TCA.

 11

PROPOSITIONS ABOUT INTERIMISTIC RELATIONAL EXCHANGE

The preceding section introduced the concept of IRE and the differences between it and ERE.

Because our intent is to provide a platform from which additional research and empirical testing may

take place, the hypotheses are designated as propositions. Although the propositions are grounded in

theory and literature, some are unavoidably more speculative than others. Furthermore, we note that

the variables in this section do not exhaust all possible relationship variables. We focus on them

because (1) they have been consistently deemed important by researchers who study relational

exchange, and (2) we posit that they are significantly affected by the temporal differences between

IRE and ERE. Specifically, we focus on trust, interdependence, and relational norms (see Table 1).

Trust and Substitutes for Trust

Trust is a critical variable in relational exchange (e.g., Dwyer, Schurr and Oh 1987; Morgan

and Hunt 1994; Wilson 1995). According to Morgan and Hunt (1994, p. 23), trust exists "when one

party has confidence in an exchange partner's reliability and integrity." In the evolutionary model of

relational exchange, trust is important because it acts as a relational governance mechanism assuring

partner reciprocity and non-opportunistic behavior (Ganesan 1994; Morgan and Hunt 1994). For

example, when mutual trust exists, parties in the exchange relationship have confidence that

“unanticipated contingencies” will be resolved “in a mutually profitable manner,” rather than

opportunistically (Ganesan 1994, p. 4).

In addition, trust contributes significantly to the level of partner commitment to the exchange

relationship (Moorman, Zaltman, and Deshpande 1992; Morgan and Hunt 1994; Wilson 1995).

According to SET, the causal relationship between trust and commitment results from the principle of

generalized reciprocity, which holds that "mistrust breeds mistrust and as such would also serve to

decrease commitment in the relationship and shift the transaction to one of more direct short-term
 12

exchanges" (McDonald 1981, p. 834). Mutual commitment is an important part of functional

relational exchange because it ensures that partners will put forth the effort and make the investments

necessary to produce mutually desirable outcomes (Dwyer, Schurr, and Oh 1987; Ganesan 1994).

Although the evolutionary model of relational exchange implies that a high level of trust must

exist to have functional relational exchange, it assumes that little to no trust exists at the beginning of

the relationship, but develops through exchange episodes, or relationship interactions, over an

extended period of time (Dwyer, Schurr, and Oh 1987; Wilson 1995). One way in which trust evolves

is through mutual adaptations (Hallen, Johanson, and Seyed-Mohamed 1991). Adaptation occurs

when one firm alters its processes and/or the products exchanged to accommodate the other party

(Hakansson 1982). Through repeated interactions involving accommodations, each partner earns the

trust of the other.

In contrast, IRE allows partners less time for trust to evolve. Thus, we argue that the existence

of trust in IRE relies strongly on variables that allow trust to develop either prior to, or very early in

the life of, the exchange relationship. Three variables that would help firms engaged in IRE to

overcome the time constraints on trust development are (1) prior extra-exchange relationship

interactions, (2) a reputation for fair-dealing, and (3) pledges.

As to prior extra-exchange relationship interactions, research indicates that positive past

interactions with an exchange partner in other relationships contribute to trust in the exchange

relationship in question (Ganesan 1994; Parkhe 1993). Specifically, past interactions lead to trust

when partners feel satisfied with past outcomes and when they have had lengthy past associations

(because these long-term associations term foster understanding). Thus, positive, prior, extra-

exchange relationship interactions can be used by firms prior to, or at the beginning of, IRE as signals

that their exchange partner can be trusted (Weitz and Jap 1995).
 13

As to a reputation for fair-dealing, it would also seem useful for trust-building in IRE because

the trust it creates exists at the beginning of the relationship. An exchange partner's reputation for

fair-dealing not only provides an important signal that the partner can be trusted, but also that the

partner will do what is necessary to make the exchange relationship successful, for their reputations

are "on the line". As noted by Anderson and Weitz (1992, p. 22), exchange partners "can signal their

level of commitment through their...[reputation] in other...[exchange] relationships."

Finally, pledges can also enable firms in IRE to create trust quickly because they are

investments that can be made very early in the life of the exchange relationship (Ganesan 1994).

Pledges are "actions undertaken by channel members that demonstrate good faith and bind the

channel members to the relationship. Pledges are more than simple declarations of commitments or

promises to act in good faith. They are specific actions binding a channel member to a relationship"

(Anderson and Weitz 1992, p. 20).

Relationship-specific investments are pledges that are "investments specific to a channel

relationship[,]...are difficult or impossible to redeploy to another channel relationship...,[and] lose

substantial value unless the relationship continues" (Anderson and Weitz 1992, p. 20). Relationship-

specific investments “provide a powerful signal” about the other party’s “credibility and desire to

make sacrifices by investing in assets that are not easily redeployable elsewhere” (Ganesan 1994,

p.10). Thus, relationship-specific investments contribute to trust because they represent a pledge that

is viewed as a signal that the partner making the investments has benevolent intentions in the

relationship.

In summary, trust in IRE would appear to be heavily based on prior extra-exchange

relationship interactions, a reputation for fair-dealing, and/or pledges, because these factors do not

require intra-exchange relationship interactions over an extended period for their development. Given
 14

the short life of IRE, the existence of trust in these relationships should be more reliant on these

mechanisms to develop trust than in ERE where partners have more time to learn to trust each other

through interactions in the exchange relationship in question.

P1: Trust in IRE relies more on (1) prior extra-exchange relationship interactions, (2)
reputation for fair-dealing, and (3) pledges than in ERE.

Ceteris paribus, though, trust in IRE should be lower than in ERE. The rationale here is that

unlike IRE, ERE can utilize both intra-exchange relationship interactions and a priori mechanisms to

build trust. Therefore, because the intra-exchange relationship option of “trial and testing" (Wilson

1995, p. 340) is less available in IRE, trust should be lower in IRE than in ERE.

P2: Trust is lower in IRE than in ERE.

Recall that trust exists when a firm is confident that its exchange partner is reliable because of

the partner's integrity. If functional IRE has lower levels of trust than ERE, then firms in IRE will

have less of a sense that they can rely on their partner because of partner integrity. This observation is

significant because the less a firm in an exchange relationship believes it can rely on the integrity of

its partner, the less commitment it will have to the exchange relationship and, thus, the less likely it

will put forth the effort and make the investments necessary to have successful, or functional,

relational exchange. Therefore, the question arises: what do firms engaged in functional IRE use

instead of the belief that they can rely on their trading partner's integrity? In other words, what do

firms in functional IRE use as a substitute for trust? In TCA, Williamson (1994, p. 97) notes that

substitutes for trust are:

[C]redible commitments (through the use of bonds, hostages, information disclosure rules,
specialized dispute settlement mechanisms, and the like)...[that create] functional substitutes
for trust...Albeit vitally important to economic organization, such substitutes should not be
confused with (real) trust.
 15

When mutual substitutes for trust exist, they create mutual barriers to opportunistic behavior,

which (1) allow firms in an exchange relationship to feel that they can rely on each other and (2)

result in the firms exhibiting trust-like behaviors, i.e., behaving as if they trusted their exchange

partner. As Rindfleisch and Heide (1997, p. 48) observe, trust-like behaviors on the part of a firm in

an exchange relationship are based on the incentive structures of their trading partner(s) "that

promote relationship-oriented behaviors or restrain opportunism."

Substitutes for trust are especially important in IRE because they, unlike trust which requires

considerable time to develop, can be developed quickly. For example, a fleeting business opportunity

that requires collaboration and creates clear mutual dependence between exchange partners provides

recognizable fair-dealing incentives that can be used immediately by the partners as substitutes for

trust (Das and Teng 1998; Rindfleisch and Heide 1997; Rousseau, et al.1998; Sheppard and Sherman

1998; Williamson 1994). Therefore, given that IRE provides less time than ERE for trust

development, ceteris paribus, IRE should rely more on substitutes for trust than ERE to create the

trust-like behaviors that are necessary for functional relational exchange.

P3: Reliance on substitutes for trust to promote trust-like behaviors is higher in IRE than in
ERE.

Three variables that could serve as substitutes for trust in IRE are environmental incentives,

reputation, and relationship-specific investments (Anderson and Weitz 1992; Rindfleisch and Heide

1997; Stump and Heide 1996; Zajac and Olsen 1993). First, consider environmental incentives.

Environmental conditions in the form of mutual business threats and opportunities can create

substitutes for trust within an exchange relationship. (Varadarajan and Cunningham 1995). These

include entering new international markets, protecting competitive position in home-market, shaping

industry structure, entering new product domains, gaining a foothold in emerging industries, and

acquiring new skills. Fierce competition for resources or a market from other companies or networks
 16

of firms provides exchange partners with strong incentives to work together in good faith

(Rindfleisch and Heide 1997; Lambe and Spekman 1997). From a resource dependence perspective,

the partners are dependent upon each other for their success, and this dependence motivates them to

cooperate and behave non-opportunistically (Pfeffer and Salancik 1978). In addition, IRE is

particularly appropriate when a high degree of environmental uncertainty exists because, as

Varadarajan and Cunningham (1995 p. 284) note, "when unstable market conditions prevail, such as

is the case when the technological base of an industry is evolving rapidly, the flexibility and

adaptability offered by less rigid forms of ...[relational exchange] may be viewed favorably."

Environmental uncertainty also poses a problem for contracts in that partners lack the ability

to write a contract that can cover all contingencies and ensure proper adaptation by the partners to

changing conditions (Gundlach and Murphy 1993). The contractual limitations caused by

environmental uncertainty heighten the mutual realization of the exchange partners that in order for

them to "to achieve their mutual goals,” they must “conduct themselves in an ethical manner” to

encourage such behavior from their partners (Gundlach and Murphy 1993, p. 41). Thus, substitutes

for trust are created by environmental uncertainty because the partners should sense that if they

display opportunism, or fail to act equitably, the relationship will not work

Second, consider a reputation for fair-dealing. Such a reputation, as previously discussed,

may signal that the party has high integrity and, therefore, is trustworthy. However, it may also serve

as a substitute for trust because it can be thought of as an asset that provides incentives for firms that

possess it to behave as if they were trustworthy (Ganesan 1994; Jones, Hesterly, and Borgatti 1997;

Rindfleisch and Heide 1997). Firms having this asset are hesitant to damage it by acting

opportunistically because a reputation for fair-dealing (1) takes a long-time to develop and (2)

requires significant investment. Therefore, as Anderson and Weitz (1992, p. 22) suggest, "By making
 17

sacrifices and demonstrating concern in other long-term relationships, channel members develop a

reputation for operating effectively in quasi-integrated relationships. Such a reputation reduces the

motivation of a channel member to act opportunistically, because such action would reduce the value

of the reputation asset."

Third, consider relationship-specific investments. In addition to being a potential signal of an

exchange partner's trustworthiness (Anderson and Weitz 1992), relationship-specific investments

may also serve as substitutes for trust because they are incentives for the firms that have made these

investments to act non-opportunistically (Heide and John 1988; Stump and Heide 1996). These

"idiosyncratic assets" (Anderson and Weitz 1992, p. 20) are non-fungible in nature and would be lost

if the relationship were to terminate. Relationship specific assets may be tangible, such as a joint

manufacturing facility, and/or intangible, such as a computer distributor who trains personnel to

repair a specific brand of computer (Anderson and Weitz 1992). These relationship-specific assets

increase the cost of terminating the exchange relationship and motivate partners to act non-

opportunistically (Heide and John 1988, Stump and Heide 1996).

Although all three are capable of functioning as substitutes for trust, IRE might rely less on

relationship-specific investments than on the other two substitutes for trust for two reasons. First,

fears of a short-lived exchange relationship should cause partners to make fewer relationship-specific

investments. Rational partners in IRE should be hesitant to make relationship-specific investments

because the exchange relationship may not last long enough to provide a pay-back on these

investments (Bucklin and Sengupta 1993; Heide and John 1990; Stump and Heide 1996). Therefore,

partners will likely attempt to keep relationship-specific investments at the minimum necessary for

functional exchange.
 18

Second, though relationship-specific investments may occur at the beginning of any exchange

relationship, such investments also may be made over the life of an exchange relationship. Examples

of relationship-specific investments that are made over time include: expanding joint manufacturing

capabilities, improving the ability of the firms to work well together, keeping employees' knowledge

current on the other firm's products, updating a just-in-time inventory system, and entwining a

manufacturer and retailer in consumers' perceptions through promotions (Anderson and Weitz 1992;

Dwyer, Schurr and Oh 1987; Heide and John 1988; Morgan and Hunt 1994). Because IRE provides

less time for relationship-specific investments, ceteris paribus, IRE will have lower levels of

relationship-specific investments than ERE. Thus, we argue that IRE should rely less on relationship-

specific investments as substitutes for trust than on environmental incentives and reputation.

P4: Relationship-specific investments are less important than either reputation or

environmental incentives as substitutes for trust in IRE.

Interdependence

Interdependence is the recognition by both partners in an exchange relationship that the

relationship provides benefits greater than either partner could attain alone (Mohr and Spekman

1994), or that outcomes obtained from the exchange relationship are greater than those possible from

other business alternatives (Anderson and Narus 1984, 1990; Dwyer, Schurr, and Oh 1987; Thibaut

and Kelly 1959). The existence of mutual substitutes for trust creates interdependence in exchange

relationships. How substitutes for trust create "outcome" interdependence is illustrated by

environmental incentives, such as a mutual business opportunity or threat. Here, exchange partners

are dependent upon each other for their success and, thus, if the firms are to achieve their individual

goals their partners must achieve their goals also. Because it fosters a cooperative effort between the

exchange partners, interdependence is important for functional relational exchange. Indeed, research

suggests that interdependence is critical for promoting cooperation and adaptation in relational
 19

exchange (Hallen, Johanson, and Seyed-Mohammed 1991; Kumar, Scheer, Steenkamp 1998), and a

key contributor to partner commitment (Dwyer, Schurr, and Oh 1987; Morgan and Hunt 1994).

The evolutionary model views interdependence as something that is built over a protracted

period of time as the partners (1) invest in the exchange relationship, (2) determine mutually

compatible goals, and (3) see positive outcomes from the relationship. The developmental stages that

lead to fully functional relational exchange have a variety of nomenclature, e.g., “exploration and

expansion” (Dwyer, Schurr, and Oh 1987), defining "purpose" and setting "boundaries” (Borys and

Jemison 1989), "defining purpose and setting relationship boundaries” (Wilson 1995), and

“vision/values/voice” (Spekman, et al. 1996). In the early stages of the evolutionary model of

relational exchange, exchange partners see the potential to achieve outcomes that are superior to what

they could achieve alone, but also must move through a series of developmental stages before a high-

level of interdependence emerges.

The evolutionary model's view of interdependence-building is problematic for IRE because

IRE has less time to build interdependence in a such a stages fashion. The short life of IRE and its

heavy reliance on substitutes for trust imply that interdependence must emerge very early in the life

of the relationship to ensure functional IRE.

P5: Interdependence, the mutual recognition of mutual benefits, emerges earlier in IRE than in
ERE.

Relational Norms

Norms are expectations about behavior that are at least partially shared by a group of

decision-makers (Heide and John 1992). Norms are important in relational exchange because they

provide the governance "rules of the game". These "rules" depend on the "game," which from an

exchange perspective has been described as either discrete or relational (Macneil 1980). Discrete

exchange norms contain expectations about an individualistic or competitive interaction between

 20

exchange partners. The individual parties are expected to remain autonomous and pursue strategies

aimed at the attainment of their individual goals (Heide and John 1992).

In contrast, relational exchange norms “are based on the expectation of mutuality of interest,

essentially prescribing stewardship behavior, and are designed to enhance the wellbeing of the

relationship as a whole” (Heide and John 1992, p. 34). In the evolutionary model of relational

exchange, relational norm development takes place over an extended period of time through many

interactions between the partners (Hakansson 1982; Frazier and Anita 1995; Ring and Van de Ven

1994; Wilson 1995). For example, Dwyer, Schurr, and Oh (1987) suggest that tacit relational norms

emerge as partners interact during the exploration stage of relationship development.

The evolutionary model view of relational norm development poses difficulties for explaining

IRE relational norm development. Clearly, for the IRE to be functional the partners need to have

relational norms that will foster collaboration. Again, though, it appears that IRE does not have time

(and certainly has less time) for norms to develop through intra-exchange relationship interactions.

Therefore, IRE appears to be heavily reliant upon mechanisms that could develop mutual relational

norms either prior to the initiation of the relationship, or very early in the life of the relationship.

Three such mechanisms include: (1) industry-wide exchange norms, (2) the partners' mutual

relational exchange competence, and (3) past extra-exchange relationship interactions.

As to industry-wide exchange norms, a generally accepted set of norms for IRE is often

available to the exchange partners because of the culture of the industry (Gulati, Khanna, and Nohria

1994; Jones, Hesterly, and Borgatti 1997). For example, firms in certain industries, such as biotech

and high technology, have a tradition of IRE that is absent in firms in such industries as oil and

chemicals, which tend to have longer product and exchange relationship life-cycles. In Silicon

Valley, where non-proprietary and non-exclusive exchange relationships appear to be widely

 21

accepted, companies have developed sets of norm-governed behaviors regarding IRE (Economist

1997). The clan-like culture established by these firms enables managers to migrate from company to

company, bringing their past experiences, expectations, and contacts with them (Ouchi 1980). This

environment has developed its own ecosystem, with a unique set of rules and an almost incestuous set

of linkages among managers who have worked together and left either to form start-ups or work for

other Silicon Valley firms (Bahrami and Evans 1995). Key managers move from start-up to start-up

and take relationships with them that further establish a set of industry-specific norms.

As to a relational exchange competence, such a competence helps partners short-cut the norm

development process and provides opportunities for a less experienced firm to model the behavior of

its more experienced partner. As described by Day (1995, p. 299), firms that have a relational

exchange competence:

have a deep base of experience that is woven into a core competency that enables them
to outperform rivals in many aspects of...[relational exchange] management. They
have well-honed abilities in selecting and negotiating with potential partners, carefully
planning the mechanics of the...[relationship] so roles and responsibilities are clear-
cut, and continually reviewing the fit of the...[relationship] to the changing
environment.

A relational exchange competence hastens norm development because firms having such a

competence will (1) more likely choose partners who will abide by relational norms, and (2)

understand themselves the value following relational norms (Weitz and Jap 1995). In addition, firms

that have a high capacity to learn and evidence a level of adaptability (Senge 1990) will be more

attuned to the norm development process. We argue that firms that have a relational exchange

competence have evidenced a high level of learning capacity and can learn through fewer interactions

the norms that will maximize relational exchange outcomes.

As to past extra-exchange relationship interactions between the exchange partners (Oliver

1990; Weitz and Jap 1995), because norms develop through interactions over time, such interactions
 22

could contribute to IRE norm development and significantly shorten the process of such

development. Indeed, if the previous dealings involved enough of the boundary personnel in the

present IRE relationship and were extensive enough, the relationship’s norms could be almost fully

developed prior to the initiation of the relationship.

In short, there are industry and firm specific mechanisms that might allow partners in IRE to

eliminate much of the intra-exchange relationship norm development process suggested by the

evolutionary model of relational exchange. Three that appear to be useful for norm development in

IRE are industry-wide exchange norms, a relational exchange competence, and past extra-exchange

relationship interactions.

P6: Relational norms emerge earlier in IRE than in ERE.

P7: Compared with ERE, relational norm development in IRE relies more on (1) industry-
wide exchange norms, (2) relational exchange competence, and (3) past extra-exchange
relationship interactions.

Although relational norms should emerge earlier in IRE than in ERE, the dimensions of the

relational norm construct imply that ERE ultimately should exhibit a higher degree of relational

norms than IRE. Research suggests that the three dimensions of the relational norm construct are

flexibility, information exchange, and solidarity (Noordewier, John, and Nevin 1990). Specifically:

Flexibility defines a bilateral expectation of willingness to make adaptations as circumstances

change …Information exchange defines a bilateral expectation that parties will proactively
provide information useful to the partner…Solidarity defines a bilateral expectation that a
high value is placed on the relationship. It prescribes behaviors directed specifically toward
relationship maintenance. (Heide and John 1992, p. 35, 36)

Based on the dimensions of the relational norm construct, IRE would appear to be less

relational than ERE (see Figure 1), because it should score lower on the dimensions of information

exchange and solidarity than ERE. Partners in IRE have the expectation that the relationship will be
 23

short-lived and, in certain situations, the ending of the exchange relationship might find the former

partners becoming competitors. These potentialities would seem to decrease the level of solidarity

and information exchange in IRE in two ways. First, given the expectation of a short life, partners in

IRE would seem to harbor less of a sense of continuity about the relationship and consequently would

exhibit a lower level of stewardship behavior and/or solidarity. Second, since many IRE relationships

might be classified as “co-opetition," because firms that are exchange partners now might later

compete, partners in IRE might restrict the flow of information because they fear that some of the

information that they share now might be used against them later (Brandenburger and Nalebuff 1996;

Hamel and Prahalad 1994; Hamel, Dos, and Prahalad 1989).

P8: IRE exhibits lower levels of relational norms than ERE.

CONCLUSION

Because research on IRE is in its early stages and, so far at least, strictly conceptual,

implications must be considered highly tentative. However, examining the potential implications of

the propositions (should they be confirmed by later research) is warranted. We suggest that

researchers and managers begin to think more about relational exchange from a temporal perspective.

Specifically, researchers need to develop a model of relationship development that is appropriate for

IRE. In addition, it appears that IRE needs to be managed differently than ERE.

A New Model

Assuming that empirical research confirms the validity of the propositions above, the

evolutionary model of relationship development does not explain how an IRE relationship develops a

working and functional relationship. This would point to the need for researchers to develop a model

that is appropriate for IRE. Based on the propositions above, it would appear that an important mix of

antecedents that enable a functional IRE relationship are: interdependence based on environmental
 24

incentives and reputation, relationship-specific investments, past extra-exchange relationship

experience, and mutual relational exchange competence. These represent a reasonable starting point

for the development of a non-evolutionary model of relational exchange.

In this paper, trust and relational norms have been proposed to exist at low levels in functional

IRE relative to the same variables in functional ERE. If these propositions are confirmed,

evolutionary-model studies of relational exchange that have resulted in moderate or weak

relationships between these variables and other variables may have been partially the result of the

inclusion of IRE relationships in the sample. It might no longer be adequate to differentiate relational

exchange by type (e.g., buyer-seller, horizontal, or joint R&D). It also might be useful to ascertain the

temporal expectations of the exchange partners.

Managing Interimistic Relational Exchange

Different relational exchange contexts appear to require different managerial responses and

different sets of expectations. Because of different temporal expectations about IRE, these exchange

relationships would seem to require that partners play by a set of rules that is somewhat different

from those applicable to ERE. In particular, boundary managers in IRE relationships should be

prepared for the potentiality that, in some cases, their exchange partners may become their competitor

at the conclusion of the exchange relationship. The question becomes: how can the exchange partners

manage the existence of the seemly diametrically opposed roles of present collaborator and potential

competitor without jeopardizing the collaborative spirit that must exist between the partners for

functional IRE? As discussed, substitutes for trust provide much of the incentive for partners to work

together non-opportunistically for the life of the exchange relationship and much of the assurance

necessary for exchange partners to feel comfortable with this arrangement. Because IRE is not as

relational as ERE, boundary managers should share information that is necessary to make the
 25

exchange relationship work, but should be circumspect with other information. In addition, boundary

managers should have a pre-planned exit strategy since it is expected that the exchange relationship

will likely have a short life. Correspondingly, they should monitor both the environment and the

exchange relationship for cues that the project is about to end.

Also, scanning for and selecting exchange partners are critically important activities for IRE.

As revealed in the propositions, two critical variables that should be requirements of any IRE partner

are a reputation for fair-dealing and a relational exchange competence. Selecting an exchange partner

with a fair-dealing reputation will reduce the risk of opportunism because (1) the reputation may be

well-earned and (2) the exchange partner will not want to harm a reputational asset that it has spent

time and money developing. Having an exchange partner with a relational exchange competence will

help the partners short-cut the process necessary to establish the working norms necessary for

functional IRE. Finally, if possible, it might be helpful to choose a partner with whom one has had

substantial, satisfactory, extra-exchange relationship experience. Again, this will speed-up the norm

development process and ensure a higher comfort-level between the exchange partners.

In conclusion, there has been a tendency to view relational exchange as only a long-term

proposition. Thus, the evolutionary model of relational exchange that has developed, while

appropriate for ERE, cannot explain key aspects of IRE. Because of the time-pressure to develop and

achieve goals, the exchange relationship characteristics associated with IRE are different from ERE

and, thus, IRE warrants a different conceptual model. Such work holds the promise of great rewards,

both for marketing theory and practice. This article begins the process of expanding our view of

relational exchange to incorporate temporal considerations.

 26

____________________________
NOTES
1
For example, Day (1995 p. 297) notes that some relational exchange relationships "are deliberately short lived, lasting
only as long as it takes one partner to enter a new market.” Similarly, Varadarajan and Cunningham (1995 p. 284) point
out that some forms of relational exchange "will have a finite life by definition (e.g., a joint development project);” and
relational exchange relationships "that do not involve shared equity are less rigid and may be easier to revise, reorganize,
or terminate … As a result, when unstable market conditions prevail, such as is the case when the technological base of
an industry is evolving rapidly, the flexibility and adaptability offered by less rigid forms of [relational exchange] may be
viewed favorably.”
2
As a reviewer pointed out, on a firm-level, the concept of interimistic relational exchange is analogous to the
organizational behavior concept of "coalitions" in which individuals in an organization form temporary alliances that last
long enough to address a mutual opportunity or threat (Cobb 1991; Pearce 1995).
3
A notable exception is the research by Gundlach and Murphy (1993) that used the relational continuum that exists
within contractual exchange to show how ethical principles become more important as exchange becomes more
relational.
 FIGURE 1
The Exchange Continuum And Interimistic Relational Exchange
_________________________________________________________________________________________________________

Transactional Exchange Relational Exchange

Discrete Repeated
Interimistic Enduring
Exchange Transactions Exchange Exchange
 TABLE 1
A Comparison of Enduring Versus Interimistic Relational Exchange

Relationship Attribute Enduring Relational Exchange Interimistic Relational Exchange

Expected Life-Span Long Short

Business Develops over time and is long-lasting. Immediate

Opportunity/Threat
Facing The Relationship
Trust Develops over time. Time limitations stunt the development of trust. Exchange
partners are more reliant upon “substitutes for trust”. The
trust that exists is based on the partners' reputation for
fair-dealing, prior extra exchange relationship
interactions, and/or signals from relationship-specific
investments.

Interdependence Evolves over time to a high-level. A high-level exists, and must emerge early in the life of
the exchange relationship.

Relational Norms Evolves over time to a high-level. A moderate-level exists because information exchange is
more guarded, and because extant measures of relational
norms capture the degree to which exchange partners
have a long-term orientation. The relational norm
development process is shortened by the existence of
industry-wide exchange norms, partners who have a
relational-exchange competence, and/or prior extra-
exchange relationship interactions.
____________________________________________________________________________________________________________
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C. Jay Lambe is an assistant professor of marketing at Texas Tech University. Prior to entering

academe, he was engaged in business-to-business marketing for both Xerox and AT&T. His research

interests include business-to-business marketing, relationship marketing, marketing strategy, and

sales management. He has publications in the Journal of Product Innovation Management, European

Journal of Marketing, Journal of Personal Selling and Sales Management, and International Journal

of Management Reviews.

Robert E. Spekman is the Tayloe Murphy Professor of Business Administration at The Darden

School. He was formerly Professor of Marketing and Associate Director of the Center for

Telecommunications at the University of Southern California. He is a recognized authority on

business-to-business marketing and strategic alliances. His consulting experiences range from

marketing research and competitive analysis, to strategic market planning, supply chain management,

channels of distribution design and implementation, and strategic partnering. Professor Spekman has

taught in a number of executive programs in the U.S., Canada, Latin America, Asia, and Europe. He

has edited/written seven books and has authored (co-authored) over 80 articles and papers. Professor

Spekman also serves as a reviewer for a number of marketing and management journals as well as for

the National Science Foundation. Prior to joining the faculty at USC, Professor Spekman taught in

the College of Business at the University of Maryland, College Park. During his tenure at Maryland,

he was granted the Most Distinguished Faculty Award by the MBA students on three separate

occasions.
Shelby D. Hunt is the J.B. Hoskins and P.W. Horn Professor of Marketing at Texas Tech University,

Lubbock, Texas. A past editor of the Journal of Marketing (1985-87), and author of Modern

Marketing Theory: Critical Issues in the Philosophy of Marketing Science (South-Western, 1991), he

has written numerous articles on competitive theory, macromarketing, ethics, channels of

distribution, and marketing theory. Three of his Journal of Marketing articles, “The Nature and

Scope of Marketing” (1976), “General Theories and the Fundamental Explananda of Marketing”

(1983), and “The Comparative Advantage Theory of Competition” won the Harold H. Maynard

Award for the “best article on marketing theory.” He received the 1986 Paul D. Converse Award

from the American Marketing Association for his “outstanding contributions to theory and science in

marketing.” He received the 1987 Outstanding Marketing Educator Award from the Academy of

Marketing Science and the 1992 American Marketing Association/Richard D. Irwin Distinguished

Marketing Educator Award. His new and provocative book is entitled A General Theory Of

Competition: Resources, Competences, Productivity, Economic Growth (Sage Publications, 2000).

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