Aurifeille, J.-M. & Medlin, C.J. Inter-firm governance and relationship performance: A study of market, hierarchy and relational coordination mechanisms. in Globalisation, governance and ethics. J.-M. Aurifeille & C.J. Medlin & C. Tisdell & J. Gil Lafuente & J. Gil Aluja, eds. New York, Nova Science, 2011. Pages 99-112 Chapter 8 Inter-firm Governance and Relationship Performance: A Study of Market, Hierarchy and Relational Coordination Mechanisms Jacques-Marie AURIFEILLE * and Christopher J. MEDLIN ** * Professor, University of French Polynesia, FRANCE ** Senior Lecturer, Business School, University of Adelaide, AUSTRALIA Abstract Inter-firm alliances are an effective means of globalising, with each firm providing an element of the final product and receiving a share of total profit. However, activating and maintaining an inter-firm alliance is fraught with governance difficulties. Governance within inter-firm alliances refers to oversight of strategic direction and the mechanisms for resolving disagreement. Within inter-firm business relationships governance modes have been conceptualised as a mixture of three ideal coordination mechanisms: market, hierarchy, and relationships. Measuring governance effectiveness requires choice of a managerial goal. As the purpose of business relationships is profit through joint action, we examine governance effectiveness with regard to relationship performance. A coordination mechanism model of governance is proposed and examined in the empirical setting of 162 software-exporting firms and their cross-border business relationships. A structural equation model indicates that relational coordination is a mediator variable explaining relationship performance. Two governance modes explain relationship performance. A non-market relational governance mode and a plural mode comprised of contract-hierarchical and relational coordination mechanisms. The final sections of the paper discuss future research and managerial implications. Keywords: governance mechanisms, coordination mechanisms, relationship performance