This chapter builds the theoretical model that will be used for the empirical analysis of long-term supply relationships. The theoretical model incorporates fifteen theoretical constructs which are derived from transaction cost economics (Williamson, 1985), the generalized transaction cost theory (Nooteboom, 1992a), and studies that focus on the relational nature of interorganizational exchange (Helper, 1987; Nooteboom, 1996; Sako, 1992). Section 3.2 provides the definitions of these constructs and relates them to empirical studies on interorganizational exchange. Section 3.3 combines the fifteen theoretical constructs by means of twenty-five hypotheses in one theoretical model. Section 3.4 concludes the chapter. The reason for such a multitude of variables is that long-term supply relationships are complex and that due to the interaction of variables none can be omitted without causing a bias due to omitted variables.