The Interplay Between Governance Mechanisms in Managing Outsourcing Relationships for Hotel Sustainability

Abstract

Hotels continue to play a big role in the sustainability of the travel and tourism industry supply chain. Hotels use outsourcing as a supply strategy and manage it through contractual and relational governance. These governance mechanisms are aimed at curtailing supplier opportunism in the relationship for resilient relationships and sustained performance. This study investigated the
complementarity and substitutability of the two outsourcing governance mechanisms in Uganda’s hotel context through quantitative research. Cross-sectional survey data were collected from hotel managers using a structured questionnaire. A hierarchical component model was fit and the results revealed a partial mediation effect of the governance mechanisms on each other. The governance mechanisms do not completely complement or substitute each other. The results extend transaction cost economics, agency, and relational contracts theories to managing outsourcing relationships. The results suggest that hotels
should employ both contractual and relational governance in managing outsourcing relationships.

Keywords: Outsourcing, contractual; relational; performance