Esra F. Gençtürk and Preet S. Aulakh
Executive Summary
In response to an increasingly global and rapidly changing competitive environment, manufacturers are placing greater emphasis on building long-term relationships with otherwise autonomous foreign distributors. Despite the strategic value and growing prevalence of these nonequity recurrent exchanges, they entail risks and hazards of opportunistic exploitation due to the absence of common ownership. As a result, the theoretical and practical need to understand these recurrent nonequity exchanges becomes increasingly important. In this study, Gençtürk and Aulakh draw on research streams on transaction cost economics, contract law, and sociological exchange perspectives to develop a model that permits the simultaneous assessment of antecedents and consequences of relational governance of long-term recurrent exchanges.
With data from 129 recurrent channel relationships between U.S. manufacturers and their foreign distributors, this study provides empirical support for the importance of establishing a relationship structure that is conducive to the use of different forms of governance. That is, exporting manufacturers attempting to initiate normative governance in relational exchanges need to encourage the development of a channel structure that is characterized by socialized and less formalized roles. The findings also suggests that, all else being equal, a manufacturer’s dependence on a foreign distributor creates an environment in which relational norms can be cultivated as a dependence-balancing mechanism. Conversely, formalized structure and relationships in which the manufacturer is not dependent on a foreign distributor support the use of governance based on vertical decision control.
This study also provides empirical support for the notion that instituting and managing norms and vertical control can be critical to fostering the effectiveness of the relationship between autonomous firms. Specifically, the results show that the relationship-enhancing effect of vertical decision controls is limited to the manufacturer’s satisfaction with the foreign distributor, and this effect is significant only in the cases in which the perceived uncertainty of the host market is low. Conversely, not only does norms-based governance positively influence the manufacturer’s perception of market performance of and satisfaction with foreign distributor, but its positive influence becomes even more pronounced in uncertain host markets as well.
Overall, Gençtürk and Aulakh’s study provides guidance for both manufacturers and foreign distributors in their quest to build effective interorganizational channel relationships. The findings attest to the importance of recognizing relationship effectiveness–enhancing benefits that can be derived from the careful structuring of recurrent export channel relationships and their appropriate governance under different levels of host-market uncertainty.
Biography
Esra F. Gencturk is Assistant Professor of Marketing in the College of Business Administration and Economics at Koç University. She received her PhD and MBA from University of Minnesota and her BS from University of Southern California. Her areas of marketing expertise and interest include international marketing strategy, foreign market entry and penetration strategies, and management of intra- as well as interorganizational marketing exchanges. Her research has been published in Journal of International Marketing, Industrial Marketing Management, and Journal of International Business Studies.
Preet S. Aulakh holds the Pierre Lassonde Chair in International Business in the Schulich School of Business at York University in Toronto. He received his PhD from the University of Texas at Austin and his BS and MA from Panjab University, India. His areas of marketing expertise include international marketing strategy, foreign entry modes, and international licensing. His recent work has been published in Academy of Management Journal, Journal of International Business Studies, and Management International Review. He is currently involved in a large research project and two editorial initiatives on the organizational transformations of firms from emerging economies.
Journal of International Marketing, Vol. 15, No. 1, March 2007
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