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A Transaction Cost Perspective on Vertical Contractual Structure and Interchannel Competitive Strategies
Abstract
Despite potent theory to contrast transactional governance in “markets and hierarchies,” the variety of extant channel systems strains this dichotomy. The authors examine three contractually integrated channel systems in the hardware industry: wholesale voluntary chains, dealer cooperatives, and independents. They extrapolate from a transaction cost perspective to frame hypothesized differences in decision making structures and competitive strategic postures across relational forms. Results from a sample survey of retail informants are generally supportive.
... Applications of TCA have become fairly common in the general marketing literature (Anderson and Weitz 1986;Anderson and Schmittlein 1984;Dwyer and Oh 1988;Heide andJohn 1988, 1992), especially in en- try-mode investigations (Anderson and Gatignon 1986;Anderson and Coughlan 1987;Gatignon and Anderson 1988;Klein 1989;Klein, Frazier, and Roth 1990). The theory appears to be especially effective in ex- plaining vertical integration decisions. ...
... Under these conditions, market-contracting arrangements, or low-control modes, are favored because the threat of replacement damp- ens opportunism and forces suppliers to perform ef- ficiently ( Anderson and Coughlan 1987;Anderson and Gatignon 1986). When markets fail and the range of suppliers available to the firm is restricted (resulting in "small-numbers bargaining"), the supplier's ten- dency to behave opportunistically is reduced only through stringent negotiation and supervision of con- tractual relationships ( Dwyer and Oh 1988), thereby greatly increasing the transaction costs associated with low-control modes. In such circumstances, the firm can significantly reduce its transaction costs by re- placing external suppliers with its own employees, whose behavior it can monitor and control more ef- fectively (Hennart 1989;Klein 1989). ...
Some peculiar characteristics of service firms, such as low capital intensity and the inseparability of production and consumption, have necessitated the modification of the traditional transaction-cost framework used to study entry-mode choice. By relaxing some unduly restrictive assumptions of the conventional transaction-cost analysis (TCA) model, the paper argues that firms prefer to start with full-control modes. It postulates that substantial variation in entry-mode choice occurs when firms that are characterized by low asset specificity relinquish control in response to the rising costs of integration or the diminishing ability to integrate. Several hypotheses on the propensity of service firms to employ shared-control entry modes are developed and tested. The results not only provide insights into entry-mode choice by service firms but also indicate how the transaction-cost framework can be broadened to develop a more comprehensive model for understanding entry-mode choice.
... Harrigan (1986), Robertson and Gatignon (1998) are authors who work in the scientific field of collaborative resource sharing and management. Common property can be observed in producer associations, as well as with those that manage common commercial rights that do not always derive directly from agricultural land (Dwyer and Oh, 1988;Sauvé e, 1998;2000). Cheung (1969b) analyzed agricultural land contracts through economic rents. ...
New Institutional Economics (NIE) uses solutions from law, economics and organization. The purpose of this article is to link in a single analytical approach the institutional environment, its change in the organizations uniting in one, what is happening in contracts with agricultural lands. The explanation of this type of governance means to integrate: theoretical definitions; formal rules (laws, court decisions and other legal acts); economic institutions-means and mechanisms of exchange; legal and economic forms in which, through governance of transactions property rights are transferred and protected. In order to achieve this goal, it is necessary to present the elements of the institutional matrix that are the cause of changes in subordination and coordination. Following the process of implementing an approach for reconciling the legal and economic nature of the contract forms and integrating the states, contract organizations and transaction costs in a common model. In order to solve the research problems tasks are adapted methods from law, economics, statistics. Such are: (a) positive legal analysis of legislation; (b) historical (retrospective) method of analysis of changes; (c) discrete-structural analysis to explain the process; (d) comparative-institutional analysis to clarify alternatives and an explanation of any of the effects; (е) regression analysis to model the relationships and present possible one's scenarios to show the direction in which changes are needed. Changes in legislation, legal forms, mechanisms and the amount of payments create new behavioral patterns that change the contract. Therefore, in retrospect, we are witnessing how the number of changes in legal acts, the amount of fees; the number of participants-administrators of the processes; the number and registers-change the number of transactions; the duration of the actions in the contracts, which ultimately predetermines the different amounts of transaction costs for agricultural lands. This interdependence was established by constructing an econometric model. The analysis presents opportunities for change that would lead to scenarios with a reduced level of transaction costs, that is, improving governance and showing the way to improve the institutional environment related to agricultural lands in Bulgaria.
Keywords: agricultural land, institutional change, governance, contracts, transaction costs
... Harrigan (1986), Robertson and Gatignon (1998) are authors who work in the scientific field of collaborative resource sharing and management. Common property can be observed in producer associations, as well as with those that manage common commercial rights that do not always derive directly from agricultural land (Dwyer and Oh, 1988;Sauvé e, 1998;2000). Cheung (1969b) analyzed agricultural land contracts through economic rents. ...
New Institutional Economics (NIE) uses solutions from law, economics and organization. The purpose of this article is to link in a single analytical approach the institutional environment, its change in the organizations uniting in one, what is happening in contracts with agricultural lands. The explanation of this type of governance means to integrate: theoretical definitions; formal rules (laws, court decisions and other legal acts); economic institutions-means and mechanisms of exchange; legal and economic forms in which, through governance of transactions property rights are transferred and protected. In order to achieve this goal, it is necessary to present the elements of the institutional matrix that are the cause of changes in subordination and coordination. Following the process of implementing an approach for reconciling the legal and economic nature of the contract forms and integrating the states, contract organizations and transaction costs in a common model. In order to solve the research problems tasks are adapted methods from law, economics, statistics. Such are: (a) positive legal analysis of legislation; (b) historical (retrospective) method of analysis of changes; (c) discrete-structural analysis to explain the process; (d) comparative-institutional analysis to clarify alternatives and an explanation of any of the effects; (е) regression analysis to model the relationships and present possible one's scenarios to show the direction in which changes are needed. Changes in legislation, legal forms, mechanisms and the amount of payments create new behavioral patterns that change the contract. Therefore, in retrospect, we are witnessing how the number of changes in legal acts, the amount of fees; the number of participants-administrators of the processes; the number and registers-change the number of transactions; the duration of the actions in the contracts, which ultimately predetermines the different amounts of transaction costs for agricultural lands. This interdependence was established by constructing an econometric model. The analysis presents opportunities for change that would lead to scenarios with a reduced level of transaction costs, that is, improving governance and showing the way to improve the institutional environment related to agricultural lands in Bulgaria.
... A large number of empirical studies corroborate the principal refutable predictions that connect transaction attributes such as specific investments, uncertainty, and performance ambiguity to governance forms I such as vertical integration and alliances (for a review; see Rindfleisch and~eide 1997). Despite these successes, transaction cost analysis (TCA) has made little headway into the marketing strategy literature (notable exceptions include Day and Klein 1987;Dwyer and Oh 1988). Indeed, some of the sharpest criticism of TCA has emerged from the strategy-oriented work, and it converges on common themes. ...
The authors extend transaction cost analysis into a governance value analysis (GVA) framework to address marketing strategy decisions, especially with regard to strategies grounded in cooperative relationships. The GVA is a four-part model. Heterogeneous resources, positioning, the consequent attributes of exchange, and governance form all interact to determine success in creating and claiming value. The trade-offs among these factors are the core insight offered by the model. The authors illustrate these trade-offs and specify empirically refutable implications. Finally, they sketch directions for future work and a blueprint for managerial decision making.
... The range of levels of integration includes the following (e.g., Brown 1981;Dwyer and Oh 1988;Etgar 1976b;Klein, Frazier, and Roth 1990): First, representing a lack or absence of integration, parties in conventional or indepen- dent channel relationships include relatively autonomous members and rely on market mechanisms such as price to administer exchange. Parties in these market-based ex- change relationships retain complete latitude over their own decisions and, for the most part, are completely au- tonomous. ...
Governance strategies, such as integration or control, structure and regulate the conduct of parties in exchange relationships; as such, they serve to constrain the latitude of the decision making of channel partners. Similarly, collaborative communication can be used to create an atmosphere of mutual support, thereby creating volitional compliance between partners. The authors develop a model that addresses the interrelationships of governance and communication and examine the effects of collaborative communication on channel outcomes (the dealer's perceptions of commitment to, satisfaction with, and coordination of activities with a focal manufacturer) across various levels of integration and control. Based on survey data collected from a national sample of computer dealers, the findings indicate that when levels of integration or manufacturer control are high, the effect of collaborative communication on outcomes is weaker than when integration or control is low.
... The investments in adaptations correspond closely to the concepts of idiosyncratic investments and asset specificity in the transaction cost approach (Williamson 1979). Several researchers have used those con- cepts in explaining governance structures in market- ing (Anderson and Weitz 1986;Dwyer and Oh 1988;Heide and John 1988;Jackson 1985). Other scholars have suggested agency theory as an appropriate tool for analyzing dyadic relations (Eisenhardt 1989). ...
On the basis of social exchange theory and the resource-dependence model, a structural model of interfirm adaptation is formulated. The model accounts for mutual adaptation as a consequence of trust-building as well as for unilateral adaptation due to imbalanced dependence between the parties. The view that interfirm adaptations are elements in a social exchange process is supported.
... Trust, as a key component of social capital theory, is considered to be an important element of relational governance, resulting in decreased relational risk (Macaulay, 1963;Granovetter, 1973;Nooteboom, 1996;Dyer and Oh, 1988;Bradach and Eccles, 1989;Ring and Van de Ven, 1994). It can be based on the social norms of: reciprocity, flexibility, solidarity, personal bonding or routinised behaviour (Klein Woolthuis et al., 2005). ...
... In business-to- business relationships, joint activities may occur in product design and development, quality control, logistics, and delivery systems. Anderson, Lodish, and Weitz (1987) and Dwyer and Oh (1988) suggest that when parties participate in a relationship and make joint decisions about goals and plans that affect the outcome of the relationship, the rela- tionship is typically successful. Specifically, with respect to relationship outcomes, Mohr and Spekman (1994) find that partnerships with higher levels of joint action arrangements tend to yield higher sales. ...
The authors examine the concept of customer benefits in business-to-business markets in an international context. They distinguish between core and add-on benefits, and they discuss product quality, service quality, flexibility, trust, joint action, and commitment of the supplier as determinants of these customer benefits. They base their analysis on 981 respondents in two countries. The results suggest the importance of understanding the determinants in providing customer benefits. Furthermore, the authors observe significant cultural differences with respect to the impact of different determinants on perceived customer benefits. Following a discussion of the results, the authors present managerial implications, research limitations, and directions for further research.
... • the quality of the information, namely, the accuracy, the relevance and the credibility of the information exchanged (Daft and Lengel, 1986) • the sharing of the information, by which is meant the degree to which sensitive, even confidential information is exchanged between partners; the sharing of information corresponds to a relational norm that characterises a partnership (Macneil, 1981;Noordewier et al., 1990) • participation, which will be high if the partners decide their objectives together and if they plan their actions together. Conversely, participation will be low if one of the two allies imposes his/her views unilaterally and if he/she does not bear in mind the other ally's comments (Anderson et al., 1987;Dwyer and Oh, 1988). This last dimension seems particularly helpful in explaining the franchisees' satisfaction. ...
Few empirical studies cover the theme of franchisees' satisfaction. This paper investigates the impact of the nature of relationship between franchisers and franchisees on franchisees' satisfaction. Research data have been collected by surveying 400 French franchisees. Surprisingly, this analysis shows that intangible factors in a franchise system are as important as the franchiser's support or even more important than the support. The article discusses implications of the study's results for future research and for managers. The results suggest how to create a positive environment (fairness, communication, trust) which is related to ethical marketing.
How can we explain the variety and resilience of non-standard arrangements through which agents organize the transactions that support their economic activities? This chapter proposes an extended and inclusive transaction cost framework that goes beyond the classic tradeoff between markets and hierarchies. Through the case of hybrid arrangements, this chapter argues that what differentiates hybrids and other organizational solutions are the allocation of rights in the organization of transactions and the constraints it imposes on their governance. Special attention is paid to the mechanisms implemented to face disturbances and unexpected events and, more generally, to the many challenges the diversity of organizational solutions poses to theory as well as policy-making.
Free market advocates doubt the ability of industrial regulation to make oil and gas companies adopt local content practices. This study explores this position by assessing the effects of industrial regulations on business networks. Using data collected from a survey of 191 senior practitioners in the oil and gas industry in Tanzania and analysed using the PROCESS tool for moderating effect, the study shows that the continuity, complexity, cooperation, socialisation and formalisation of business networks all have significant positive effects on local content practice. At the same time, however, conflict has a significant negative effect on local content practice. The findings indicate that the interactions of industrial regulation with continuity, complexity, conflict and cooperation significantly reduce local content practices, while for interdependence, informality, adaptation, socialisation and formalisation the results are not significant. As such, this study implies that host countries should not exclusively depend on industrial regulation to achieve national objectives around local content. Policy formulation should take into account the business interconnectedness of oil and gas companies because local content practices are not only affected by industrial regulation but also by companies’ respective business networks.
The relationship between relational governance mechanisms and multi-unit franchising, where a single franchisee owns and operates multiple units, has received limited attention in the existing literature. Previous studies primarily focus on the role of trust in such arrangements. Consequently, this study aims to develop and test a theoretical model that explores the association between a higher allocation of units to this type of franchisee and key attributes of relational governance, such as participation and communication. Adopting the franchisors’ perspective, our sample consists of 170 networks affiliated with the Brazilian Franchising Association (Associação Brasileira de Franchising [ABF]), and data were collected from various sources, including a self-administered questionnaire (based on data from 2018). The results provide support for our general hypothesis, indicating a positive association between relational aspects of the franchisor-franchisee partnership and a higher proportion of units owned by multi-unit franchisees. Additionally, we find that the operational sector (retail/service) and specific local investments diminish the explanatory power of the model’s variables related to relational governance, suggesting a secondary influence on the decision-making process concerning the contractual mix.
Keywords:
multi-unit franchising; relational governance; contractual mix; trust
It is essential for managers of brands offering products in large and diverse but complicated and competitive emerging markets to promote their brand to resellers because resellers buy through distributors who simultaneously offer competing products. Using data collected from such resellers, it is argued that a brand that applies appropriate reseller management techniques, with concepts like relationship marketing, can compete successfully by influencing the preferences of resellers. Efficient management of direct brand-reseller relationships by a local brand representative will facilitate the exchange of realistic information required by both brand managers and resellers. The exchange will allow a reduction of costs and bring an increase in benefits from the association. Limitations of the study are discussed and directions for future research are provided.
The authors investigate the impact of customers’ mobile app adoption on grocery shopping behaviors. Specifically, they investigate the cannibalization of existing physical and online channels by the newly adopted mobile app and evaluate changes in households’ total expenditures at the focal chain. They find that households adopting the mobile app marginally decrease their spending in physical stores, but considerably increase their expenditures and shopping trips through the mobile app. They present evidence that the mobile app plays a synergistic role for customers who never used a digital shopping channel. Lastly, the authors find a competitive encroachment effect by the mobile app. They find the impact of mobile app adoption is greater in markets where the focal chain faces more intense competition from a nearby competitor.
The purpose of this paper is to analyze how different configurations of network governance influence the performance of member firms. To achieve this objective, we surveyed 338 Brazilian firms participating in strategic networks (SNs). We addressed our research question by employing cluster analysis and the Kruskal–Wallis test. We focus the literature review on formal and relational governance of SNs and their interplay. We found three clusters that illustrate different configurations of governance. One cluster is characterized by relatively high levels of formal and relational governance in small and young SNs. A second cluster is characterized by low levels of formal governance and relatively high levels of relational governance, but surprisingly in larger and older SNs. The third cluster is characterized by relatively low levels of formal and relational governance in small and young SNs. Our main results illustrate different configurations of governance of SNs. Small and young SNs that combined high levels of formal and relational governance also present the highest levels of firm performance. Surprisingly, larger and older SNs followed a governance configuration based on high levels of relational governance and low levels of formal governance. These findings direct to new configurations of network governance that are controversial to existing literature and also offer managerial contributions. We contribute to the debate about formal and relational governance by adding two new variables to the analysis—network size and network age. Results show that SNs with different size and age may adopt distinct governance configurations.
This article examines the phenomenon of plural governance, a firm's simultaneous use of market contracting and vertical integration for the same basic transaction. The author studies two particular aspects of plural governance, namely the conditions that motivate firms to deploy plural governance and the manner in which one governance form influences the other when the two coexist in a joint structure. Drawing on agency theory and information economics, the author develops a set of research hypotheses and tests them empirically in the context of industrial purchasing decisions. The results suggest that the plural governance phenomenon can be understood from the perspective of solving information asymmetry problems between buyers and suppliers. The author discusses the implications of a “make and buy” approach to extant theory of interfirm governance, relationship management, and marketing strategy in business-to-business settings.
Purpose
This paper aims to consider the impact of contractual and normative governance mechanisms on recommendation intent in a context of healthcare and professional lighting where repeat business from a customer is absent. The authors suggest both contractual and normative governance can create recommendation intent, but only when sufficient customer value is created.
Design/methodology/approach
The authors draw on a combination of survey and archival data from the supplier and customer in the medical equipment and advanced (business) lighting systems industries. The authors analyze the data using seemingly unrelated regression and mediation tests.
Findings
Contracts and relational norms can increase customer recommendation intent, but only when the supplier creates customer value.
Practical implications
The paper’s findings suggest that customers of business solutions are more likely to recommend their supplier when contracts are relatively detailed and when buyers and suppliers attempt to craft strong relational norms, despite service solutions being delivered during a relatively short time span.
Originality/value
The extant research on business solutions has focused on extended relationships between exchange partners with a high likelihood of repeated transactions. The authors demonstrate how to govern relationships in a solutions context where the likelihood of repeat business from the same customer is low using contractual and normative governance.
Purpose
The present competitive marketing environment demands effective role of distribution channels to create and develop a value-based infrastructure where companies can easily distribute their products into the consumers’ market. Relationship bonding between the channel partners and the company strengthens marketing efficiencies of the distribution function, which is supported by policies of the companies relating to joint business actions and value sharing. Both the tangible functional value and emotional functionalities play a vital role in the continuous success and the growth of distribution channel. The purpose of this paper is to understand the value-based distribution channel relationship for greater channel equity in fast-moving consumer goods (FMCG) sector.
Design/methodology/approach
The present study used a survey design to collect data from 156 FMCG channel members selected through stratified random sampling procedure. A five-point Likert-type scale was personally administered to obtain participants’ responses. Data were analysed using the Relative to an Identified Distribution (RIDIT) approach.
Findings
The findings of the current research paper have demonstrated that in the current competitive marketing environment, only the functional values are not enough. This research paper identifies that there is a strong need of emotional touch and linkages which leads to a symbiotic channel–company relationship and commitments in FMCG industry.
Originality/value
The present research is an original and innovative thought process of evaluating factors influencing the value-based distribution channel relationship for greater channel equity pertaining to FMCG industry by using the RIDIT approach.
Recent trends in industrial markets indicate that buyers and sellers are increasingly supplanting conventional “arm's length” arrangements with “alliances” involving closer ties. The authors develop a theoretical model of industrial buyer-supplier ties that presents joint action as a key aspect of closeness. Whereas conventional ties emphasize a clearly defined division of labor, these newer relationships are distinguished by more tightly integrated roles based on undertaking activities jointly. Drawing primarily on a normative theory of transaction costs, the authors identify the conditions under which these relationships are useful. The utility of the relationships derives from an ability to safeguard relationship-specific investments and to facilitate adaptation to uncertainty. Using data from a sample of industrial firms and their suppliers, the authors test these predictions. The results show good support for the model. Consequences for research and practice in marketing are drawn.
Many marketing exchanges are characterized by an information asymmetry between suppliers and customers. Specifically, customers are faced with both adverse selection and moral hazard problems that involve, respectively, uncertainty about supplier characteristics and the risk of quality cheating. Drawing on prior research, the authors propose that agency problems in a customer relationship can be resolved by means of customer bonds and price premiums, which serve as signals and supplier incentives, respectively. The authors also propose that adverse selection and moral hazard problems exist in relationships between suppliers and their employees. Similar to the customer relationship, these problems can be addressed with signals and incentives of various kinds. The authors present hypotheses regarding the agency problems in both of these relationships and test them empirically in the context of automotive service purchases. Data obtained from 287 service managers support the hypotheses. The data also suggest that institutional differences across service outlets (e.g., ownership structure and size) influence how the two types of agency problems are managed.
The authors advance a conceptual model of channel member satisfaction that distinguishes between economic and noneconomic satisfaction. The resulting model then is tested using meta-analysis. Meta-analysis enables the empirical investigation of a model involving several constructs that never have been examined simultaneously within an individual study. More specifically, the authors unify the stream of research on power use—the focus of many satisfaction studies in the 1970s and 1980s—with more recent work on trust and commitment, which usually explores antecedents other than power use. The results indicate that economic satisfaction and noneconomic satisfaction are distinct constructs with differential relationships to various antecedents and consequences. Furthermore, this study demonstrates that satisfaction is both conceptually and empirically separable from the related constructs of trust and commitment.
Previous research on buyer behavior in high technology markets has focused on specific outcomes (product adoption or rejection) as opposed to buyers’ underlying processes. The authors identify key dimensions of high technology markets and draw on organization theory and information economics to develop hypotheses about their effects on organizational buyers’ search behavior. They also present propositions about how certain aspects of a firm's present buying situation may influence its perceptions of the characteristics of a given market. An empirical test of the propositions in a sample of computer workstation purchases shows good support for the hypothesized relationships.
During the past decade, marketing managers and scholars have focused increased attention on buyer–seller relationships in business markets. This article contributes to the emerging body of knowledge in this important arena. Building from theories of relationships and empirical research across several disciplines, the authors specify six key underlying dimensions (connectors) that characterize the manner in which buyers and sellers relate and conduct relationships. Measures for these relationship connectors (information exchange, operational linkages, legal bonds, cooperation, and relationship-specific adaptations by buyers and sellers) are developed in a series of pretests. Then, on the basis of relationship profiles for more than 400 buyer–seller relationships sampled from a wide array of industries and market situations, the authors apply numerical taxonomy to develop an empirically based classification of different types of business relationships. Contrary to approaches used in much of the extant literature, taxonomic methods do not rely on an assumption that the connectors are highly intercorrelated or that they combine in some linear fashion to form a single underlying dimension. Furthermore, the research specifies antecedent market and purchase situations and shows that they affect when specific types of relationships are used. The research also shows how customer satisfaction and evaluations of supplier performance vary across different types of relationships. The results provide new insights about the nature of relationships in business markets.
Relationship management rapidly is becoming a central research paradigm in the marketing channels literature. A growing body of conceptual and empirical literature addresses different aspects of interfirm relationships, building in part on recent theoretical developments in organization theory, law, and economics. Interestingly, however, some of these theoretical frameworks make radically different assumptions about the nature of interfirm relationships, though these differences to date have not been examined systematically in the marketing literature. The author reviews these theoretical perspectives and develops a formal typology of approaches to relationship management. Specifically, he develops a typology of three different forms of governance, which vary systematically in terms of how specific interfirm processes are carried out. He also discusses the antecendents of different relationship forms and shows the results of a preliminary empirical test.
Purchasing arrangements for repetitively used industrial supplies assume many different forms. Drawing on transaction cost analysis, the authors advance a conceptual framework that organizes these arrangements along a continuum of relationships. They use data from a survey of 140 OEM purchasers of bearings to demonstrate that performance in terms of acquisition costs is enhanced when, under conditions of uncertainty, firms introduce more relational elements into their purchasing arrangements. Possession cost performance improved when larger volumes of bearings were purchased. Implications for theory and practice are discussed.
Transaction cost analysis is rapidly becoming an important theoretical paradigm in marketing. However, the accumulation of transaction cost studies has been accompanied by a growing body of criticism, primarily directed toward its underlying behavioral norm of opportunism. That norm is a serious theoretical deficiency, not only because it may be descriptively inaccurate, but also because it limits the applicability of the theoretical framework. The authors show that norms play a very significant role in structuring economically efficient relationships between independent firms. In the absence of supportive norms, it is not possible for parties whose specific assets are at risk to acquire vertical control as per the transaction cost prescription. Instead, those parties lose control because of their dependence. An empirical test of the conceptual model in a sample of manufacturer-supplier relationships shows good support for the authors’ hypotheses.
The authors report the results of a study that examines retailer participation in manufacturer-sponsored promotion programs. Two particular aspects of participation are studied, namely, (1) retailer agreement to participate in point-of-purchase programs and (2) retailer compliance with established agreements. Previous research in marketing, economics, sociology, and organization theory suggests that participation is influenced by two types of variables. The first is the nature of the interpersonal relationship that exists between the boundary personnel in the retailer's and manufacturer's firms. The second are various organization-level variables, including incentive premiums (promotional allowances) and monitoring efforts. The authors extend previous research by examining both the independent and joint effects of these factors on retailer participation. On the basis of an empirical study involving a conjoint task, the authors show that the presence of a strong interpersonal relationship does not diminish the importance of other variables, such as incentives. Within the limits of the conjoint task, the results also suggest that interpersonal relationships are less important determinants of participation than economic incentives. The authors discuss the implications of the study for marketing theory and practice.
Over the past decade, transaction cost analysis (TCA) has received considerable attention in the marketing literature. Marketing scholars have made important contributions in extending and refining TCA's original conceptual framework. The authors provide a synthesis and integration of recent contributions to TCA by both marketers and scholars in related disciplines, an evaluation of recent critiques of TCA, and an agenda for further research on TCA.
Purpose
This paper aims to propose a model of the determinants of the expansion of mature business-to-business relationships in the downstream channel of the Italian clothing industry. The authors investigate the role of both economic and social determinants of retail buyers’ intentions to expand their relationships with a seller.
Design/methodology/approach
The empirical analysis is based on surveys of more than 150 retail buyers in mature relationships with a major clothing company. This context offers a unique opportunity to explore the interplay between the need for stable relationships and the need to continuously innovate to satisfy consumer demand, given rapidly changing tastes and styles, which can inhibit relationship expansion.
Findings
Buyers’ intentions to expand relationships are primarily determined by the absence of a formal agreement with the seller. Perceptions of a seller’s goodwill seem to overshadow the detrimental effects of two likely sources of opportunism in the clothing industry: demand uncertainty and the availability of alternative suppliers. Findings also provide evidence of a substitutive effect of formal control and trust in mature business relationships.
Originality/value
The authors provide insights into the dynamics of mature business relationships with a focus on expansion, rather than just the propensity for relational continuity, and they show how the interplay of transaction costs and social dimensions leads to this expansion. The authors also provide empirical evidence of a context, the clothing industry, where downstream relationships represent an important source of competitive advantage.
Purpose
– The purpose of this paper is to examine the direct and interaction effects of relational governance and two control mechanisms, output control and process control in the context of international exchange relationships. Cross-border exchange relationships receive growing attention in the literature. Yet extant research has mainly examined single governance mechanisms. Among the few studies that investigate the interaction effects of relational governance and control mechanisms, some believe that the two mechanisms have conflicting effects, whereas others argue that they are complementary in nature.
Design/methodology/approach
– Based on a sample of 184 Chinese export ventures, the empirical paper adopts the hierarchical moderated multiple regression approach.
Findings
– The authors find that relational governance contributes positively to export performance, while output control leads negatively to export performance. The findings further suggest that output control complements relational governance to enhance export performance when combined. However, process control and relational governance substitute each other and reduce effectiveness when used simultaneously.
Research limitations/implications
– The study sheds new light on the ongoing debate about whether control mechanisms substitute or complement relational governance.
Originality/value
– The study is novel in addressing the issue of how relational governance interacts differently with two control mechanisms in the international exchange relationships.
Marketing research has devoted more and more attention to the analysis of consumer behavior. Similarly, distribution research has focused on retailing and shopper behavior. But the dynamics of industrial and consumer goods markets, impacted by globalization and the internet, reveal a major reconfiguration of intermediaries in marketing channels. This article summarizes the major theoretical foundations of channel analysis drawn from economics, sociology of organizations, and strategic planning, to identify theoretical principles that may explain the changes in the functions of channel intermediaries, and their contribution to value creation in the channel.
Purpose
– The purpose of this study attempts to fill the gap in the literature by investigating partnerships between life insurers and insurance intermediaries, the effects of these partnerships, and the parties' willingness to cooperate.
Design/methodology/approach
– Data were collected in a survey of general managers of the insurance intermediaries in Taiwan and were analysed using in-depth interviews and questionnaires. A structural equation modelling approach is employed to test the hypotheses.
Findings
– The paper finds that partnership components, communication strategies, conflict resolution approaches, and market orientation are related to partnership performance. The paper also finds that willingness to continue cooperation increases with partnership performance. The results have implications for managers of life insurers and their intermediaries.
Originality/value
– This research is one of the first studies to conceptualize and empirically examine the partnerships of life insurers and insurance intermediaries. Theoretically, a specification of the linkages between characteristics of the partnership, communication strategies, conflict resolution approaches, the market orientation of the partners, the partnership's performance and both parties' willingness to continue cooperation can provide a useful framework for future research. Practically, this study offers insights into how to proactively manage partnerships in order to improve partnership performance, willingness to continue cooperation and avoid the damaging costs inherent in failure.
Purpose
– While previous studies explored the argument that allies the notion of complexity to the complex product-service offerings being procured, this paper aims to explore whether there is a corollary with exchange governance complexity. More specifically, the paper analyzes the relationship between systemic complexity and complexity of contractual and relational exchange governance in procuring complex performance (PCP) arrangements.
Design/methodology/approach
– A multiple, longitudinal case study method is used to examine the relationship between systemic complexity and exchange governance complexity. The study deploys rich data sets by combining government and company reports with 43 semi-structured interviews.
Findings
– Preliminary conclusions suggest that as a response to increasing systemic complexity, organizations respond with increasing contractual governance complexity. However, better performing PCP arrangements illustrate that the use of simplified contractual governance in form of working agreements in combination with relational governance such as inter-personal relationships may be more effective to counteract complexity.
Practical implications
– The paper questions whether organizations should respond with increasing exchange governance complexity to counteract systemic complexity. Managers must consider the manageability and enforceability of complex contracts in combination with the formation of inter-personal relationships and simplified working agreements.
Originality/value
– This study adds to the limited empirical understanding on the nature of long-term public-private interactions in PCP. It also contributes through a rare focus on the relationship between systemic complexity and exchange governance complexity in PCP arrangements.
The traditional channels paradigm suggests increasing one 's relative power within the manufacturer/ retailer dyad. Manufacturers should focus instead on increasing total marketplace power of their dyads against other manufacturer/retailer dyads. Retailers and manufacturers are interdependent, and can compete best by harnessing the interdependence. We propose and test a model of manufacturerretailer relationships based on interdependence, called the Strategic Marketing Fit (SMF) model. Our study confirms the relationships hypothesized in the SMF model. Retailers pursuing merchandise differentiation retail strategies are better partners than retailers pursuing price leadership strategies
Specificity is a central concept to relationship management, especially with respect to resulting commitments. A theory-based analysis regarding the challenges of specific investments which explicitly addresses time-related aspects is still missing. One reason might be the traditional dominance of (comparative) static theories, especially the New Institutional Approaches. However, historicity and effective temporality are important in business relationships - especially in volatile environments - for the expression, variability and controllability of specificity and (de-) specification strategies in relationship management. Under the umbrella of Market Process Theories this paper deductively develops a co-evolutionary interpretation of specificity, enabling a theoretical analysis and empirical studies of (de-) specifica-tion strategies with explicit regard to time.
The objective of this paper is to compare, along three strategic dimensions, franchising with other types of operating arrangements in the lodging industry. The operating arrangements studied are, in addition to franchising, chain-managed and independent hotels. The three strategic dimensions include: (1) the variability or volatility of the task environment facing a hotel; (2) the business strategy chosen by a hotel's general manager; and (3) the level of sales revenue and profit margin achieved by a hotel.
Global strategic alliances have become a major research topic within all areas of management research. However, existing studies focus on performance rather than on partner search and selection; and even the research on partner selection does not analyze the situation of an "existing" global strategic alliance evaluating potential new members. The purpose of this paper is threefold. First, we show that the evaluation criteria for new members need to combine market as well as cultural and institutional factors, e.g., a so-called "dual criteria approach". Second, we analyze forces that propel existing GSAs to place more emphasis on such cultural and institutional criteria besides market ones. Third, we examine factors that can be used or considered as valid indicators for an applicant's cultural and institutional identity.
Powerful suppliers often require retailers to make significant idiosyncratic investments to improve coordination between organizations and to enhance the supplier's presence in the end market. The authors examine how a retailer might better manage the hold-up potential of these transaction-specific investments (TSIs) through the use of three control mechanisms: supplier's TSIs, the development of relational norms, and the use of explicit contracts. Moreover, the authors consider the time-dependent nature of these mechanisms by observing their effects on commitment over the course of a relationship life cycle. The results indicate that (1) a retailer's TSIs have a negative effect on its perceptions of supplier commitment; (2) a supplier's TSIs and relational norms increase the retailer's perception of supplier commitment, whereas explicit contracts are associated with perceptions of lower supplier commitment; and (3) each of the three control mechanisms moderates the negative impact of retailer investments on perceptions of supplier commitment contingent on the relationship phase. Specifically, bilateral TSIs enhance commitment in the exploration phase and a positive effect during the decline phase. The results also indicate that the retailer's perceptions of supplier commitment are positively related to its evaluation of supplier performance and satisfaction and negatively related to conflict.
The authors develop a transaction cost model of the circumstances in which small, knowledge-intensive firms switch from the channel they use in the domestic market to a different channel in a foreign market. The authors argue that the domestic channel is frequently extended into a foreign market to gain economies of scale, because product characteristics are generally similar and because of strategic momentum. In knowledge-intensive sectors, integrated channels predominate in both domestic and foreign markets. Integrated channels facilitate the protection of knowledge-based assets and high levels of interaction with customers. However, firms may switch to a less-integrated mode in a foreign market if asset specificity is relatively low, as a response to environmental diversity, and when the market makes a small contribution to overall sales. Data gathered through a disk-by-mad survey of the export channel choices of Canadian software developers generally support these propositions. The authors make a contribution to the literature by rephrasing the channel selection decision so that the conditions under which firms switch modes are emphasized, thus linking the choice of modes in a foreign market to experience in the domestic market. The authors suggest that managers need to be aware of the momentum created by domestic channels and fully evaluate alternatives before extending existing channels into or foreign market. The results help identify conditions under which an international channel strategy that is different from the one used in the home market should be considered for a knowledge-intensive product.
Recently, there has been a growing interest in the development of collaborative relationships between organizations. Much attention has been given to how organizations "expand the pie" of benefits between them; however, there is little that addresses the ensuing issue: how organizations divide the expanded pie. The author examines the relational impact of pie sharing in complex collaboration contexts marked by uncertainty in resources and output, information asymmetries, intangible aspects, and noncomparable factors and processes. The author develops a conceptual framework that examines how the use of equity and equality sharing principles in conjunction with various resource and organizational conditions can be used to affect relational outcomes systematically. Survey results of 300 research and development managers, scientists, and engineers indicate that sharing principles can have a positive or negative effect on the relationship depending on the type of sharing principle used and the characteristics of the resources and organizations. In particular, sharing processes should be responsive to the goals of the collaboration. The results underscore the strategic nature of the sharing phenomenon as well as the importance of relational concerns in complex and uncertain interorganizational settings.
With the use of unilateral control, the leader in a channel dyad (source) leads the activities of its partner (target) to achieve its own goals. Although there are numerous studies that have found a positive effect of a company's unilateral control on its own performance, the effects on the target's performance remain unexplored, even though this is essential to explain the long-term survival of the relationship. In this research, the concept of attributed performance, defined as the fraction of its own performance that the target attributes to the relationship maintained with the source, is addressed postulating a number of hypotheses about the direct effects of unilateral control and the moderating role of the source's fair behaviour. In a sample of companies involved in channel partnerships, strong evidence is found about the positive effects of unilateral control on attributed performance, and the moderating role of the source's distributive and procedural fairness.
The author applies a model based on transaction cost analysis to explain the vertical control selections made by a sample
of exporters. The model, which obtains significant support, suggests that an important contingency when deciding on the desired
level of vertical control in a particular instance, is the ability of the market to limit the opportunistic tendencies of
outside intermediaries. In effect, the market’s ability to enforce contractual arrangements is often limited. When such enforcement
cannot be relied upon, greater control represents a necessary alternative.
Purpose
– The purpose of this paper is to address the prerequisites for achieving coordinated action in reverse distribution systems. It is an underlying assumption in distribution, logistics and supply chain management that a higher level of coordination between the actors is superior to a lower, and a higher levels of coordination will in turn lead to increased performance. Coordination requires the actors to implement efficient coordination mechanisms. The separate distribution flows need to be coordinated individually with appropriate coordination mechanisms. Furthermore, actors need to pay close attention to how different coordination mechanisms co‐exist in order to achieve a higher level of coordinated action and superior system performance.
Design/methodology/approach
– The paper is based on a comparative case study of reverse distribution systems for electrical and electronic products in Norway.
Findings
– The empirical results indicate that lack of coordination across flows increases costs and reduces the service level, and a low level of coordinated action is achieved. In contrast, it is also found that well functioning coordination mechanisms across flows decrease costs and increase the level of service, indicating that coordinated action is achieved. It is also found that end‐user characteristics are driving forces leading to different types of reverse distribution systems.
Originality/value
– The paper builds an important bridge between separate flows in distribution systems, and addresses a void in distribution research.
Purpose
The paper aims to examine how trust interacts with factors affecting interorganizational knowledge sharing in green supply chains, where cooperation and competition coexist.
Design/methodology/approach
A new research model is developed which comprises nine constructs and 13 research hypotheses, with trust as a mediating construct. The nine constructs are measured by well‐supported measures in the literature. The hypotheses are tested on data collected from 288 major green manufacturing firms in Taiwan, using structural equation modeling.
Findings
The paper finds that trust is the pivot of the factors influencing interorganizational knowledge sharing. The more a factor contributes to trust positively (such as participation and communication) or negatively (such as opportunistic behavior), the more the factor contributes to knowledge sharing correspondingly. The factors with no significant influence on trust (such as shared values and learning capacity) have no or less influence on knowledge sharing.
Research limitations/implications
The empirical study is conducted on green supply chains, with data collected from Taiwan's green manufacturing firms. With the research model developed, cross‐industrial studies on various forms of supply chains can be conducted to investigate whether differences between supply chains exist about the role that trust plays in interorganizational knowledge sharing.
Practical implications
The findings of the paper provide useful insights into how supply chain members should reinforce their collaborative behaviors and activities that would enhance the trust‐based relationships, in order to achieve the competitive advantage of knowledge sharing for the supply chain as a whole.
Originality/value
The new research model developed allows the relationships between trust and other influencing factors on interorganizational knowledge sharing to be explored. The model reflects the coexistence of the cooperation and competition relationships between supply chain members, which is not dealt with in previous studies.
Uses symbolic interaction concepts to explain norm-regulated behaviour in industrial marketing relationships. Lends support to the notion that partners’ subjective interpretations of their relationship must be congruent for relational norms and, hence, collaboration to emerge. By examining 46 of a manufacturer’s established trading relationships, investigates which factors distinguish relationships that are collaborative from other forms of trading relationships. Suggests that when partners exhibit a consensus to collaboration, they share strategic complementarity and the investments made by one side are valued by the other. Interestingly, each also believes the other faces high exit costs even though both sides maintain access to alternative partners. In addition to a discriminant analysis depicting different forms of trading relationships, develops a post hoc analysis of the profile of collaborative trading partners. Discusses the managerial and academic implications.
Discusses four theories of internationalisation: the Uppsala model of internationalisation; the eclectic paradigm and transaction cost analysis; the interactive network approach of the International Marketing and Purchasing Group; and what may be termed the business strategy approach. Suggests that a model incorporating the key elements of each approach could present a more realistic and comprehensive picture of the market entry decision.
This study contributes to an understanding of plural forms of governance by integrating research on norms-based and control-based mechanisms in managing interorganizational relationships. The authors develop a model of structural antecedents and performance consequences of these two dis- tinct governance forms. Based on data from 129 relationships between U.S. manufacturers and foreign-based independent distributors, the empirical results show a differential effect of relationship structures on the use of control-based and norms- based governance. Furthermore, the results show that these governance forms have distinct performance implications, and the nature of their influence on the effectiveness of the relation- ship varies by the environmental uncertainty in the foreign markets.
Purpose
The purpose of the paper is to analyse empirically research‐oriented university‐industry relationships based on the incorporation of relationship marketing (RM) and technology transfer theory.
Design/methodology/approach
This paper is based on an extensive literature review and initial qualitative research, a conceptual model is presented and tested using structural equation modelling methods. Analysis was conducted, and is reported, in three steps, including path analysis and hypothesis testing, model re‐specification and a multi‐group analysis comparing university and industry respondents.
Findings
Trust, commitment and integration were found to positively influence satisfaction and were confirmed as key drivers of successful university‐industry relationships. While trust was the strongest driver of satisfaction, commitment emerged as the strongest predictor of intention to renew. The results also confirmed the proposed interrelationships between the relationship characteristics. Organisational compatibility emerged as positively influencing all relationship characteristics, indicating its relevance for university‐industry relationships and suggesting its potential importance for other relationships crossing essentially different organisational environments. Surprisingly, only a weak influence of staff personal experience on commitment was found.
Research limitations/implications
The results are limited to Australian relationships and by their cross‐disciplinary nature. Furthermore, a potential bias towards positive relationships might exist in the data.
Originality/value
The primary contribution of this paper lies in the development of a foundation for research in a new services business context by combining the established theory of RM with the emerging area of technology transfer. Building a thorough empirical basis for future research, the researchers anticipate the development of a comprehensive university‐industry relationship research stream.
The political economy framework illuminates interplay between the internal and external sociopolitical and economic forces of marketing channels. Framing the collection and analysis of data from retailer informants on channel environments, configuration, and decision structure, a theoretical model is developed for explaining interorganizational responses to uncertainty and dependence constraints of the channel environment. Heterogeneity is hypothesized to precipitate complex and fluid channel structures as a means of coping with uncertainty. In contrast, high levels of variability in the output environment are expected to foster vertical integration and bureaucratization as a means of reducing dependence. Support for both hypotheses is reported and implications for future research are discussed.
Evaluating organizations according to an efficiency criterion would make it possible to predict the form organizations will take under certain conditions. Organization theory has not developed such a criterion because it has lacked a conceptual scheme capable of describing organizational efficiency in sufficiently microsopic terms. The transactions cost approach provides such a framework because it allows us to identify the conditions which give rise to the costs of mediating exchanges between individuals: goal incongruence and performance ambiguity. Different combinations of these causes distinguish three basic mechanisms of mediation or control: markets, which are efficient when performance ambiguity is low and goal incongruence is high; bureaucracies, which are efficient when both goal incongruence and performance ambiguity are moderately high; and clans, which are efficient when goal incongruence is low and performance ambiguity is high.
Previous analysis of marketing organization has focused on the coordination of marketing activities and on organizational forms used to accomplish this, while ignoring the organization of marketing tasks at the work unit level. This article develops a contingency approach to the structure and performance of marketing activities at the work unit level, as well as higher levels within organizations, by blending the theoretical implications of traditional organization theory and transaction cost economics. Four propositions are developed to explain the effectiveness, efficiency, and adaptiveness of various marketing organizational structures. In addition, four basic structures of marketing organization are also explored.
The author examines the determinants of control loss in the marketing channels of 40 U.S. manufacturers, each of which has vertically integrated into wholesale distribution by the establishment of manufacturers’ sales branches. The central hypothesis tested is that the efficiency of a vertically integrated system depends on the adoption of organizational forms which enable the firm to limit the degree of control loss and subgoal pursuit predictably resulting from vertical expansion. Control loss is operationalized in terms of the extent to which the travel and entertainment expenses of branch sales personnel exceed necessary levels. The results demonstrate the important influence of organizational structure and control systems on the efficiency of marketing operations. The findings are interpreted in terms of Williamson's organizational failures framework.
The political economy framework illuminates interplay between the internal and external sociopolitical and economic forces of marketing channels. Framing the collection and analysis of data from retailer informants on channel environments, configuration, and decision structure, a theoretical model is developed for explaining interorganizational responses to uncertainty and dependence constraints of the channel environment. Heterogeneity is hypothesized to precipitate complex and fluid channel structures as a means of coping with uncertainty. In contrast, high levels of variability in the output environment are expected to foster vertical integration and bureaucratization as a means of reducing dependence. Support for both hypotheses is reported and implications for future research are discussed.
Key informant reports from both sides of a set of wholesaler-retailer dyads are analyzed to investigate the convergent and discriminant validity of the measures. These measures, derived from a political economy model, describe the structural form and collective sentiments within the dyadic interaction. The results indicate that the structural form measures have convergent and discriminant validity. However, the sentiments variables fail to show adequate validity. The methodological and theoretical implications of the results are assessed.
The author examines the determinants of opportunistic behavior in an interfirm relationship. Data from a franchise setting are examined for the effects of inter-organizational structure and interfirm influence on attitudes and opportunistic behavior. The results indicate that opportunism is affected by attitudes as well as such factors as interorganizational structure. Theoretical and managerial implications for the analysis of marketing channels are offered.
A multivariate analysis was used to compare the operational efficiency of administratively coordinated and market coordinated vertical marketing systems. The study proposes nine dimensions where administrative coordination can be superior. The results of the study provide evidence that an administratively coordinated system is indeed superior, especially with regard to streamlining intrasystem activities and decisions.
The authors investigate the effects of the organizational structure used for marketing planning on the credibility and utilization of marketing plans. Data on 53 organizations were obtained from multiple respondents in the marketing areas of those organizations. The results indicate that a bureaucratized planning structure with formal rules and procedures and departmental specialization can enhance both plan credibility and utilization. However, high centralization of authority affected these variables negatively. The explanatory mechanisms suggested by these results are discussed and managerial implications presented.
Based in part on previous research reported in the marketing channels literature, an approach for measuring interfirm power is developed which centers on power's hypothesized sources. Within a dyadic channel relationship, the role performance of a firm in its primary channel responsibilities is seen to drive the level of the other firm's dependence in their relationship. This dependence, in turn, determines the former firm's level of power over the latter firm. Empirical results from a study in a franchise channel system are used to evaluate the reliability and construct validity of the proposed measures.
The competitive market is eroding. To an increasing degree, transactions are occurring in internal markets within the framework of long-term relationships. The emerging domesticated markets call for more attention to the management of interorganizational systems and to the political aspects of economic decision making.
This study reports trends in role portrayals of male and female characters in television commercials between 1971 and 1976. Several comparisons are made between portrayals in TV commercials and roles in U.S. population. The authors conclude that marketers and society have begun to accept the changing role of women.
This research presents both a conceptual and a methodological framework for examining organizational buying behavior from a multiperson level of analysis. Focusing on those organizational members who participate in the procurement decision making process, this research investigates the buying group's adaptive structural configuration in response to varying levels of environmental uncertainty.
This paper presents a unifying framework for the analysis of distribution channels which encompasses both economic and sociopolitical determinants of channel member behavior and provides a suitable departure point for comparative work. The framework integrates present approaches to the study of marketing channels and provides an essential, but heretofore missing, basis for comprehensive empirical research in the area.
Corporate organization and activities extend beyond conventional ownership limits in a variety of ways. The marketing channel, for example, exerts substantial influence on the firm's internal activities. Organization structure and processes in the corporation information and control systems are affected by channel considerations. Arguments have been raised against attempts by one channel member to direct the efforts of all or part of an interorganizational vertical network. However, most scholars are believed to support the view that some form and degree of leadership is desirable and, at any rate, manifest in many day-to-day exchange activities.
This article asks three important questions: Who has the ability to lead channels? Who is in the best position to do so? Who should lead?
The scope of research on interorganizational exchange behavior in the marketing channels literature has been very limited, in part because of an incomplete conceptual framework. What is urgently needed is a realistic conceptualization of the process of exchange behavior between organizations within marketing channels. As a first step, this article develops a framework of interorganizational exchange behavior designed to provide channel researchers with a broadened perspective of what research issues need to be addressed in promoting future progress and understanding in the marketing channels area.
Previous analysis of marketing organization has focused on the coordination of marketing activities and on organizational forms used to accomplish this, while ignoring the organization of marketing tasks at the work unit level. This article develops a contingency approach to the structure and performance of marketing activities at the work unit level, as well as higher levels within organizations, by blending the theoretical implications of traditional organization theory and transaction cost economics. Four propositions are developed to explain the effectiveness, efficiency, and adaptiveness of various marketing organizational structures. In addition, four basic structures of marketing organization are also explored.
The traditional paradigms of marketing are expanding to incorporate negotiated exchanges with internal and external coalitions in the pursuit of competitive advantage. This paper explores the implications of a broader paradigm for setting priorities in research and theory development in strategic marketing. These priorities build on conceptual and methodological strengths within marketing. The perspective taken in this paper also contributes to the continuing dialogue about the appropriate role for the marketing function in addressing strategic issues.
This article presents an institutional, political economy paradigm in marketing as a complement to the presently prevailing microeconomic/marketing management concept. The latter framework provides insufficient tools for analyzing exchange structures and processes within and between organizations. Political economy is proposed as a more appropriate paradigm, as it focuses on authority and control patterns, conflict and conflict management procedures, and external and internal determinants of institutional change.
The political economy framework for the comparative analysis of marketing channel dyads proposed by Stern and Reve (1980) focused mainly on relationships between channel members. This article extends the political economy framework by indicating how environmental factors (i.e., factors external to a dyad) might influence and affect the structure and processes of the dyad. When combined with the original article by Stern and Reve, the resulting overall perspective should provide a comprehensive basis for theory development and research in the marketing channel area.
A channel of distribution consists of different channel members each having his own decision variables. However, each channel member's decisions do affect the other channel members' profits and, as a consequence, actions. A lack of coordination of these decisions can lead to undesirable consequences. For example, in the simple manufacturer-retailer-consumer channel, uncoordinated and independent channel members' decisions over margins result in a higher price paid by the consumer than if those decisions were coordinated. In addition, the ensuing suboptimal volume leads to lower profits for both the manufacturer and the retailer.
This paper explores the problems inherent in channel coordination. We address the following questions.
—What is the effect of channel coordination?
—What causes a lack of coordination in the channel?
—How difficult is it to achieve channel coordination?
—What mechanisms exist which can achieve channel coordination?
—What are the strengths and weaknesses of these mechanism?
—What is the role of nonprice variables (e.g., manufacturer advertising, retailer shelf-space) in coordination?
—Does the lack of coordination affect normative implications from in-store experimentation?
—Can quantity discounts be a coordination mechanism?
—Are some marketing practices actually disguised quantity discounts?
We review the literature and present a simple formulation illustrating the roots of the coordination problem. We then derive the form of the quantity discount schedule that results in optimum channel profits.
This descriptive study explores the reasons for integration of the personal selling function, i.e., the use of employee (“direct”) salespeople rather than manufacturers' representatives (“reps”). A hypothesized model is developed based on both transaction cost analysis and the sales force management literature. Data from 13 electronic component manufacturers covering 159 U.S. sales districts are used to estimate a logistic model of the probability of “going direct” in a given district. Results are shown to be stable across specification and estimation methods and to fit the data well. The transaction cost model is generally supported. The principal finding is that the greater the difficulty of evaluating a salesperson's performance, the more likely the firm to substitute surveillance for commission as a control mechanism, i.e., to use a direct sales force. Among other findings, direct sales forces are also associated with complex, hard-to-learn product lines and with districts that demand considerable nonselling activities. Several factors prove unrelated, including company size, the amount of travel a district requires, and the importance of key accounts.
A theoretical framework for analyzing the context, structure, process, and performance of complex organizations is developed. An attempt is made to (1) define and relate selected properties of macro and micro organization design and performance, (2) identify and compare different design patterns within a complex organization, and (3) explore how these differentiated patterns are linked as an intra-organizational network.
Twenty-two decision groups in three manufacturing and three research and development organizations are studied to identify the characteristics of the environment that contribute to decision unit members experiencing uncertainty in decision making. Two dimensions of the environment are identified. The simple-complex dimension is defined as the number of factors taken into consideration in decision making. The static-dynamic dimension is viewed as the degree to which these factors in the decision unit's environment remain basically the same over time or are in a continual process of change. Results indicate that individuals in decision units with dynamic-complex environments experience the greatest amount of uncertainty in decision making. The data also indicate that the static-dynamic dimension of the environment is a more important contributor to uncertainty than the simple-complex dimension.
This research presents both a conceptual and a methodological framework for examining organizational buying behavior from a multiperson level of analysis. Focusing on those organizational members who participate in the procurement decision making process, this research investigates the buying group's adaptive structural configuration in response to varying levels of environmental uncertainty.
The competitive market is eroding. To an increasing degree, transactions are occurring in internal markets within the framework of long-term relationships. The emerging domesticated markets call for more attention to the management of interorganizational systems and to the political aspects of economic decision making.
The authors investigate the effects of the organizational structure used for marketing planning on the credibility and utilization of marketing plans. Data on 53 organizations were obtained from multiple respondents in the marketing areas of those organizations. The results indicate that a bureaucratized planning structure with formal rules and procedures and departmental specialization can enhance both plan credibility and utilization. However, high centralization of authority affected these variables negatively. The explanatory mechanisms suggested by these results are discussed and managerial implications presented.
Key informant reports from both sides of a set of wholesaler-retailer dyads are analyzed to investigate the convergent and discriminant validity of the measures. These measures, derived from a political economy model, describe the structural form and collective sentiments within the dyadic interaction. The results indicate that the structural form measures have convergent and discriminant validity. However, the sentiments variables fail to show adequate validity. The methodological and theoretical implications of the results are assessed.
The author examines the determinants of control loss in the marketing channels of 40 U.S. manufacturers, each of which has vertically integrated into wholesale distribution by the establishment of manufacturers' sales branches. The central hypothesis tested is that the efficiency of a vertically integrated system depends on the adoption of organizational forms which enable the firm to limit the degree of control loss and subgoal pursuit predictably resulting from vertical expansion. Control loss is operationalized in terms of the extent to which the travel and entertainment expenses of branch sales personnel exceed necessary levels. The results demonstrate the important influence of organizational structure and control systems on the efficiency of marketing operations. The findings are interpreted in terms of Williamson's organizational failures framework.
Corporate organization and activities extend beyond conventional ownership limits in a variety of ways. The marketing channel, for example, exerts substantial influence on the firm's internal activities. Organization structure and processes in the corporation information and control systems are affected by channel considerations. Arguments have been raised against attempts by one channel member to direct the efforts of all or part of an interorganizational vertical network. However, most scholars are believed to support the view that some form and degree of leadership is desirable and, at any rate, manifest in many day-to-day exchange activities. This article asks three important questions: Who has the ability to lead channels? Who is in the best position to do so? Who should lead?
Retail dealers whose major business is in the products of a single manufacturer form an organizational system with that manufacturer. For this system to operate effectively as an integrated whole and to compete with similar manufacturer-dealer systems, certain administrative functions must be performed for the system, over and above the administration of the formally separate manufacturer and dealer organizations. This paper examines the interdependent roles of manufacturer and dealer and the administrative attempts to control quasi-independent units.
Based in part on previous research reported in the marketing channels literature, an approach for measuring interfirm power is developed which centers on power's hypothesized sources. Within a dyadic channel relationship, the role performance of a firm in its primary channel responsibilities is seen to drive the level of the other firm's dependence in their relationship. This dependence, in turn, determines the former firm's level of power over the latter firm. Empirical results from a study in a franchise channel system are used to evaluate the reliability and construct validity of the proposed measures.
A multivariate analysis was used to compare the operational efficiency of administratively coordinated and market coordinated vertical marketing systems. The study proposes nine dimensions where administrative coordination can be superior. The results of the study provide evidence that an administratively coordinated system is indeed superior, especially with regard to streamlining intrasystem activities and decisions.
The role of size as a variable in studies of organizational structure is critically reviewed on the basis of an analysis of 80 empirical studies carried out between 1950 and 1974. A number of conceptual and empirical problems in these studies are noted and their implications are pursued. It is argued that size has generally been defined in terms too global to permit its relation to organizational structure to be understood adequately. An alternative conceptualization is presented.
This paper takes the context of interorganizational behavior as an interorganizational field, within which specific interactions occur. An example of organizational interaction within such a field is presented by the numerous community decision organizations, such as urban renewal authorities, chambers of commerce, welfare councils, and antipoverty organizations, operating in American metropolitan communities. A typology of contexts for inclusive decision making derived from a preliminary study in three cities is used in analyzing interaction among these organizations. In the heuristic model developed, such organizations are considered the community's vehicles for the attemped maximization of specific values which become incompatible, however, when pressed beyond a certain threshold. Based on the analysis of this interorganizational field, suggestions are made for improving the "mix" of realized values which these organizations accomplish in their interaction.
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This a book. It was NOT published in a book review journal! Research Gate has made a serious mistake, listing the journal review of the book as if it were the book itself. Please ignore this listing & read the book description where it is properly listed. Better still, read the 2020 edition of Organizations Evolving.
The author examines the determinants of opportunistic behavior in an interfirm relationship. Data from a franchise setting are examined for the effects of interorganizational structure and interfirm influence on attitudes and opportunistic behavior. The results indicate that opportunism is affected by attitudes as well as such factors as interorganizational structure. Theoretical and managerial implications for the analysis of marketing channels are offered.