Robert W. Palmatier, Rajiv P. Dant, & Dhruv Grewal
Executive Summary
Researchers and managers agree that interfirm relationships are important; not only do strong interorganizational bonds directly enhance sales and profits, but because of higher levels of cooperation and reduced conflict, they also improve innovation, expand markets, and reduce costs. This article compares the four most common theoretical perspectives to uncover the key drivers of interfirm performance: (1) commitment–trust, (2) dependence, (3) transaction cost economics, and (4) relational norms. The results demonstrate the parallel and equally important roles of building commitment and trust and making relationship-specific investments for improving both financial performance and relational outcomes (e.g., cooperation, conflict). Building on the insights gleaned from tests of the four frameworks, the authors parsimoniously integrate these perspectives within a single model of interfirm relationship performance consistent with a resource-based view of an exchange.
More specifically, the authors outline the key role of commitment, trust, and relationship-specific investments within a resource-based view perspective of interorganizational relationship performance. First, as the relationship marketing literature argues, commitment encapsulates exchange partners' desire and motivation to maintain a relationship, without which it is difficult to envision the partner expending effort to enhance exchange performance. Second, trust gives partners confidence in their counterpart's future actions, strengthens commitment, supports cooperation, and prevents conflict, which suggests that it plays an enabling role by making long-term, successful interactions possible rather than affecting financial outcomes directly. Third, in terms of the direct affect of relationship-specific investments on exchange performance, though commitment captures an exchange partner's relational motivation, relationship-specific investment improves financial and relationship outcomes by increasing the efficacy or effectiveness of the exchange itself because of the exchange's improved ability to create value by either increasing benefits or reducing costs. For example, when partners invest in training, customized procedures, or specialized interfaces, they improve the functional capabilities of the exchange relationship, enabling it to create value better (e.g., lower interaction costs, improved product innovation) and catalyze higher performance. The results indicate that managers may be able to increase performance by shifting resources from "relationship building" toward specific investments targeted to increase the efficacy or effectiveness of the exchange relationship.
Moderation analysis indicates managers may find it productive to allocate more relationship marketing efforts and investments to exchanges in markets with higher levels of uncertainty. In dynamic markets, sellers also may want to take advantage of the enhanced impact of trust by increasing communication, minimizing signs of opportunism, and making relationship-specific investments to increase the customer's perception of trustworthiness.
Overall, the authors discuss implications for research and practice around four focal research questions: What drives relationship performance? How are the drivers causally ordered? When does each driver have the greatest impact? and Can these different drivers be parsimoniously integrated into a single framework?
Biography
Robert W. Palmatier is Evert McCabe Research Fellow and Assistant Professor of Marketing in the Department of Marketing and International Business at the University of Washington. Previously, he was Assistant Professor of Marketing at the University of Cincinnati. He also recently spent one year as a visiting professor at Northwestern University's Kellogg School of Management. He holds a bachelor's degree and master's degree in Electrical Engineering from Georgia Institute of Technology, an MBA from Georgia State University, and a PhD from the University of Missouri. His research interest is focused on relationship marketing theory and strategy, with an emphasis on multilevel and multichannel customer relationships in the business-to-business and retail markets. His research has appeared in Journal of Marketing, Journal of Marketing Research, Marketing Science, Journal of the Academy of Marketing Science, and the International Journal of Research in Marketing. Before academia, he held numerous positions in industry, including president and chief operating officer of C&K Components and European general manager, director of worldwide marketing, director of worldwide strategic planning, and North American sales & marketing manager at multiple divisions of Tyco-Raychem Corporation. He has also served as a lieutenant onboard nuclear submarines in the U.S. Navy. He teaches MBA classes, including sales management, marketing strategy, and services marketing.
Rajiv P. Dant is Frank Harvey Distinguished Professor of Marketing at the University of South Florida. He has previously taught at such schools as Clarkson University, Boston University, and Massachusetts Institute of Technology (on sabbatical). He received his MBA from Bajaj Institute of Bombay University and his PhD from Virginia Polytechnic Institute and State University. Between these degrees, he worked for three years in executive/managerial positions at GlaxoSmithKline Beecham, where he was involved in product management and sales functions. His current research interests include channels of distribution, research methodology, supply chain management, and franchising, with special emphasis on conflict management and managing interorganizational governance and relationships. His research has previously appeared in forums such as Journal of Marketing, Journal of Public Policy & Marketing, Journal of Retailing, Journal of the Operational Research Society, Journal of the Academy of Marketing Science, Journal of Business Venturing, Research in Marketing, Marketing Letters, Journal of Business Research, Journal of Small Business Management, and Journal of Economic Psychology, as well as numerous national and international conferences. He has assisted various organizations with executive development, research, and consulting in the areas of marketing analysis, marketing research, distribution planning, and strategy. Professor Dant is a past chair of the International Society of Franchising and has since served on its board of governors.
Dhruv Grewal (PhD, Virginia Polytechnic Institute and State University) is the Toyota Chair in Commerce and Electronic Business and a Professor of Marketing at Babson College. He is currently coeditor of Journal of Retailing (2001–present). His research and teaching interests focus on e-business, retailing, global marketing, pricing, and value-based marketing strategies. He was awarded the 2005 Lifetime Achievement in Behavioral Pricing Award (Fordham University, November 2005). He is a distinguished fellow of the Academy of Marketing Science. He has published more than 70 articles in journals such as Journal of Marketing, Journal of Consumer Research, Journal of Marketing Research, Journal of Retailing, and Journal of the Academy of Marketing Science. He has won awards for his teaching and research. His teaching awards include the 2005 Sherwin-Williams Distinguished Teaching Award, Society for Marketing Advances, 2003 American Marketing Association Award for Innovative Excellence in Marketing Education, and the 1999 Academy of Marketing Science Great Teachers in Marketing Award.
Journal of Marketing, Vol. 71, No. 4, October 2007
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