Buyer-Seller Relationships in the Procurement of Logistical Services Robert Dahlstrom University of Kentucky Kevin M. McNeilly Thomas W. Speh Miami University This study presents a two-phase model of interfirm ex- change in the logistical supply industry. The first phase uses transaction cost analysis to identify conditions lead- ing to market-based transactions, unilateral agreements, and bilateral alliances. The second phase illustrates how formal controls and relational norms yield performance in market, unilateral, and bilateral governance systems. A test of the model with data from 189 logistical supply relationships suggests that bilateral alliances emerge through the interaction of user investments in the logistics supplier, supplier logistical services, and marketplace un- certainty. Bilateral alliances attain desired outcomes through participative management and flexibility. By con- trast, market-based transactions yield desired outcomes through formalization and solidarity. Unilateral agree- ments gain performance through formalization, participa- tion, information sharing, and solidarity. Implications for logistics management and theory are discussed. Prolonged interfirm interaction is pervasive in indus- trial marketing. Indeed, prolonged interaction is manifest in industrial networks (Hhkansson and Johanson 1988), comarketing alliances (Bucklin and Sengupta 1993), and just-in-time inventory systems (Frazier, Spekman, and O'Neal 1988). Firms relying on these programs downplay short-term profits while concentrating on customer needs. Moreover, these firms rely on interfirm cooperation Journal of the Academy of Marketing Science. Volume 24, No. 2, pages 110.124. Copyright 9 1996 by Academy of Marketing Science. throughout the planning, implementation, and control of marketing programs. Interfirm cooperation is not a new phenomenon (Stigler 1951), yet marketing theory has redirected attention to- ward relational exchange (Dwyer, Schurr, and Oh 1987; Ford 1980). Heide (1994) used a relational perspective to describe a typology of governance that includes market- based exchange, unilateral agreements, and bilateral alli- ances (see also Arndt 1979; Ring and Van de Ven 1992; Robicheaux and Coleman 1994). This typology illustrates the heterogeneous nature of interfirm coordination, but it does not specify the conditions leading to alternative forms of governance. Although bilateral alliances have potential to provide firms with long-term satisfaction, superior per- formance, and competitive advantage, these returns must be evaluated in light of the prolonged commitment, com- munication requirements, and resource allocations associ- ated with the alliance. These commitments and investments preclude the firm from forging bilateral alli- ances with many trading partners. Consequently, the firm must be selective in its use of alliances and also include other governance mechanisms in its portfolio of interfirm agreements. Nevertheless, few empirical studies have ex- amined the conditions leading to bilateral, unilateral, and market-based exchange. The first purpose of this article is to investigate antece- dents to alternative forms of governance in the logistical supply industry. Recent theoretical developments in chan- nels research emphasize the heterogeneity of interorgani- zational exchanges (Heide 1994; Robicheaux and Coleman 1994). These studies emphasize that a wide range of governance modes--from market to bilateral alliances--is employed to manage interfirm transactions. Published research, however, has not addressed antecedent factors associated with alternative governance modes. We