The authors propose a new theoretical rationale that explains the paired existence of both a manufacturer's decision to limit the number of intermediaries operating in a specific geographic market and a distributor's decision to limit brand assortment in a product category. Using transaction cost reasoning, they suggest that channel selectivity agreements can be understood as interrelated exchanges of pledges, or credible commitments, that counterbalance exposure to opportunism and neutralize sources of relationship instability, thereby strengthening an interorganizational relationship. The empirical results, which are based on dyadic data from 362 manufacturer–distributor relationships, are broadly supportive of their framework.
Get full access to this article
View all access options for this article.
References
1.
AlbionMark, and FarrisPaul (1981), The Advertising Controversy.Boston: Auburn House.
2.
AndersonErin, and WeitzBarton (1992), “The Use of Pledges to Build and Sustain Commitment in Distribution Channels,”Journal of Marketing Research, 29 (February), 18–34.
3.
AspinwallLeo (1958), “The Characteristics of Goods and Parallel Systems,” in Managerial Marketing, KelleyHarold, and LazerWilliam, eds. Homewood, IL: Richard D. Irwin.
4.
BuchananLauranne (1992), “Vertical Trade Relationships: The Role of Dependence and Symmetry in Attaining Organizational Goals,”Journal of Marketing Research, 29 (February), 65–75.
5.
BucklinLouis (1963), “Retail Strategy and the Classification of Goods,”Journal of Marketing, 23 (January), 50–55.
6.
CampbellDonald T. (1955), “The Informant in Quantitative Research,”The American Journal of Sociology, 60 (January), 339–42.
7.
ChurchillGilbert A.Jr. (1979), “A Paradigm for Developing Better Measures of Marketing Constructs,”Journal of Marketing Research, 16 (February), 64–73.
8.
CopelandMervin (1923), “Relation of Consumers’ Buying Habits to Marketing Methods,”Harvard Business Review, 1 (March/April), 282–89.
9.
CoreyE. Raymond, CespedesFrank V., and Kasturi RanganV. (1989), Going to Market: Distribution Systems for Industrial Products.Boston: Harvard Business School Press.
10.
CorstjensM., and DoyleP. (1979), “Channel Optimization in Complex Marketing Systems,”Management Science, 25, 1014–25.
11.
DayGeorge S. (1990), Market Driven Strategy.New York: The Free Press.
12.
DayGeorge S., ShockerAllan D., and SrivastavaRajendra (1979), “Customer-Oriented Approaches to Identifying Product-Markets,”Journal of Marketing, 43 (Fall), 8–19.
13.
DuttaShantanu, BergenMark, HeideJan B., and JohnGeorge (1995), “Understanding Dual Distribution: The Case of Reps and House Accounts,”Journal of Law, Economics, and Organization, 11 (April), 189–204.
14.
DwyerF. Robert, SchurrPaul H., and OhSejo (1987), “Developing Buyer–Seller Relationships,”Journal of Marketing, 51 (Spring), 11–27.
15.
FarrisPaul, OliverJames, and de KluyverCornelius (1989), “The Relationship Between Distribution and Market Share,”Marketing Science, 8 (2), 107–27.
16.
FrazierGary (1983), “On the Measurement of Interfirm Power in Channels of Distribution,”Journal of Marketing Research, 20 (May), 254–62.
17.
GranovetterMark (1985), “Economic Action and Social Structure: The Problem of Embeddedness,”American Journal of Sociology, 91 (3), 481–510.
18.
HeideJan B., and JohnGeorge (1988), “The Role of Dependence Balancing in Safeguarding Transaction-Specific Assets in Conventional Channels,”Journal of Marketing, 52 (January), 20–35.
19.
HeideJan B., and JohnGeorge (1992), “Do Norms Matter in Marketing Relationships?”Journal of Marketing, 56 (April), 32–44.
20.
JohnGeorge, and ReveTorger (1982), “The Reliability and Validity of Key Informant Data from Dyadic Relationships in Marketing Channels,”Journal of Marketing Research, 19 (November), 517–24.
21.
KatzMichael L. (1989), “Vertical Contractual Relations,” in Handbook of Industrial Organization, SchmalenseeR., and WilligR. D., eds. New York: Elsevier Science Publishers.
22.
KleinBenjamin, and MurphyKevin M. (1988), “Vertical Restraints as Contract Enforcement Mechanisms,”Journal of Law and Economics, 31 (October), 265–97.
23.
KrattenmakerT., and SalopS. (1986), “Anticompetitive Exclusion: Raising Rivals’ Costs to Achieve Power over Price,”Yale Law Journal, 96 (December), 209–95.
24.
KronmanAnthony T. (1985), “Contract Law and the State of Nature,”Journal of Law, Economics, and Organization, 1 (Spring), 5–32.
25.
MarvelHoward P. (1982), “Exclusive Dealing,”Journal of Law and Economics, 25 (April), 1–25.
26.
MathewsonG. F., and WinterR. A. (1984), “Economic Theory of Vertical Restraints,”RAND Journal of Economics, (Spring), 27–38.
27.
MiracleGordon E. (1965), “Product Characteristics and Marketing Strategy,”Journal of Marketing, 29 (January), 18–24.
28.
MurphyPatrick E., and EnisBen M. (1986), “Classifying Products Strategically,”Journal of Marketing, 50 (Fall), 24–42.
29.
NunnallyJum C. (1978), Psychometric Theory.New York: McGraw-Hill.
30.
OverstreetThomas R. (1983), Resale Price Maintenance: Economic Theories and Empirical Evidence.Washington, DC: Federal Trade Commission Bureau of Economics.
31.
RanganV. Kasturi (1987), “The Channel Design Decision: A Model and an Application,”Marketing Science, 6 (2), 156–74.
32.
RosenbloomBert (1987), Marketing Functions and the Wholesaler-Distributor: Achieving Excellence in Distribution.Washington, DC: Distribution Research and Education Foundation.
SalopSteven C. (1993), “Exclusionary Vertical Restraints Law: Has Economics Mattered?”American Economic Review, 83 (2), 168–72.
35.
SamuelsonSusan S., and BalmerThomas S. (1988), “Antitrust Revisited—Implications for Corporate Strategy,”Sloan Management Review, 30 (Fall), 79–87.
36.
SchererF. M., and RossDavid (1990), Industrial Market Structure and Economic Performance.Boston: Houghton Mifflin.
37.
SenguptaSanjit (1995), “Some Antecedents of Exclusivity in Bilateral Interorganizational Relationships,”Marketing Letters, 6 (1), 33–44.
38.
SteinerRobert L. (1993), “The Inverse Association Between the Margins of Manufacturers and Retailers,” in Review of Industrial Organization 8.Boston: Kluwer Academic Publishers, 717–40.
39.
SternLouis W., and El-AnsaryAdel (1992), Marketing Channels, 4th ed. Englewood Cliffs, NJ: Prentice-Hall, Inc.
40.
SternLouis W., El-AnsaryAdel, and CoughlanAnne T. (1996), Marketing Channels.Upper Saddle River, NJ: Prentice Hall.
41.
SternLouis W., and SturdivantFrederick (1987), “Customer-Driven Distribution Systems,”Harvard Business Review, 65 (4), 34–41.
42.
TelserLester G. (1960), “Why Should Manufacturers Want Fair Trade?”Journal of Law and Economics, 3, 86–104.
43.
TelserLester G. (1981), “A Theory of Self-Enforcing Agreements,”Journal of Business, 53 (1), 27–44.
44.
TiroleJean (1989), The Theory of Industrial Organization.Cambridge, MA: The MIT Press.
45.
VickersJohn, and WatersonMichael (1991), “Vertical Relationships: An Introduction,”The Journal of Industrial Economics, 39 (September), 445–49.
46.
WebsterFrederick E.Jr. (1976), “The Role of the Industrial Distributor in Marketing Strategy,”Journal of Marketing, 40 (July), 10–16.
47.
WeigandRobert (1991), “Parallel Import Channels—Options for Preserving Territorial Integrity,”Columbia Journal of World Business, 26 (1), 53–60.
48.
WilliamsonOliver E. (1983), “Credible Commitments: Using Hostages to Support Exchange,”The American Economic Review, 73 (September), 519–40.
49.
WilliamsonOliver E. (1985), The Economic Institutions of Capitalism.New York: The Free Press.
