Jan B. Heide, Kenneth H. Wathne, and Aksel I. Rokkan
Executive Summary
Monitoring programs are a cornerstone of many firms' relationship strategies, and their role is predicted to increase with the adaptation of information technology, which facilitates the collection of performance data. Unfortunately, the empirical basis for such practices is sketchy at best. For example, although some research suggests that monitoring can serve as a control mechanism that reduces exchange partner opportunism, as predicted by transaction cost and agency theory, there is also evidence that shows that monitoring can actually promote partner opportunism.
The authors attempt to reconcile these discrepant perspectives in the literature by positing that the actual effect of monitoring depends on (1) the form of monitoring used (output versus behavior) and (2) the context within which monitoring takes place. On the basis of a longitudinal field study of buyer–supplier relationships, the authors show that output monitoring serves to decrease partner opportunism, whereas behavior monitoring, which is a more obtrusive form of control, actually increases partner opportunism. Moreover, they show that informal relationship elements in the form of microlevel social contracts serve as buffers that facilitate the deployment of formal governance devices, such as monitoring. From a practical standpoint, social contracts are important because they are likely to be "design variables," which can be purposely crafted in a relationship.
Given the costs associated with a monitoring program, both in terms of (1) direct surveillance efforts and (2) the opportunity costs associated with the partner's reactions, this study suggests that firms are well advised to proactively create contexts that support their ongoing monitoring initiatives. The authors discuss the implications of their findings for the current knowledge about the monitoring construct and the general literature on interfirm relationships.
Biography
Jan B. Heide is Irwin Maier Chair in Marketing at the University of Wisconsin–Madison and Professorial Fellow in the Department of Management at the University of Melbourne. He teaches courses on Marketing Management in the MBA and executive MBA programs. He has taught executive programs on marketing channels, product development, and strategic partnerships. He has won several teaching excellence awards, including a University of Wisconsin system award. Professor Heide's research focuses on the management of interfirm relationships. He has published in Journal of Marketing, Journal of Marketing Research, Academy of Management Journal, Journal of Law and Economics, and Journal of Law, Economics, and Organization. He has served on or is currently serving on the editorial review boards for Journal of Marketing, Journal of Marketing Research, Marketing Science, Journal of Retailing, and Journal of Business-to-Business Marketing.
Kenneth H. Wathne is Assistant Professor of Marketing in the School of Business at the University of Wisconsin–Madison. He received his bachelor's and masters' degrees from the Norwegian School of Management and his PhD from Copenhagen Business School. Professor Wathne is currently teaching marketing channels in the undergraduate program and interorganizational relationships in the PhD program. He is four-time recipient of the Mu Kappa Tau Marketing Professor of the Year award. His professional experience includes working as a project consultant and project manager with the Norwegian Institute for Research in Marketing. His research focuses on management of interorganizational relationships. This is Wathne's second article in the Journal of Marketing Research. He has also published in Journal of Marketing.
Aksel I. Rokkan is a research fellow at the Institute for Research in Economics and Business Administration, Norwegian School of Economics and Business Administration. This article was completed while Rokkan was a research fellow in the Bodø Graduate School of Business at the Bodø University College. Rokkan received his PhD from the Norwegian School of Economics and Business Administration. His research focuses on the design and management of interorganizational relationships. This is Rokkan's second article in Journal of Marketing Research.
Journal of Marketing Research, Vol. XLIV, No. 3, August 2007
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