Enhancing value co-creation and innovation performance through plural governance mechanisms: The impact of virtual governance

Abstract

Virtual governance, a new governance mechanism for managing inter-organisational exchange relationships, has gained increasing importance with the rise of the digital economy and advancements in information technology. However, the research on this topic is limited. This study examines the impact of virtual governance on value co-creation and innovation performance in buyer–supplier relationships. Additionally, using a contingency approach, we explore how virtual governance interacts with traditional governance mechanisms (i.e. relational and contractual governance) to influence the above relationships. A quantitative research method is used to collect data from 170 buyer–supplier matched questionnaires. The empirical analysis shows that virtual governance is positively associated with value co-creation and innovation performance in buyer–supplier relationships. Additionally, traditional governance mechanisms have heterogeneous contingency effects on these relationships. Specifically, relational governance positively moderates the effects of virtual governance on value co-creation and innovation performance, while contractual governance negatively moderates these effects. These findings constitute new contributions to the literature on value co-creation and provide guidance on emerging governance mechanisms in the digital economy and pluralistic governance for managing exchange relationships.