Reputation Management as a Motivation for Sales Structure Decisions

Abstract

The authors examine whether reputation concerns affect how manufacturers structure their sales organization. Using reputation theory, they examine whether reputation-related perceptions and beliefs affect whether a manufacturer that currently uses an outside selling organization (i.e., a “rep”) intends to vertically integrate the selling function or switch to a new rep. In particular, they propose that a manufacturer's intentions to replace its current manufacturers’ rep with a company sales force or a different rep is a function of its perceptions of the reputation of itself and the rep and its beliefs about how high-reputation manufacturers in the industry typically organize their selling function. Survey data support the plausibility of these reputation-based arguments as factors that influence sales organization structure decisions. These results provide some important extensions to reputation theory. The authors discuss the study's implications for both managerial behavior and the literature on channels and organizational governance.