Norms and power in marketing relationships: Alternative theories and empirical evidence
Introduction
Understanding interorganisation management is necessary if a distribution channel is to maintain or achieve satisfactory performance in a competitive environment (Stern and El-Ansary, 1992). Although this view is not novel (cf. Alderson, 1954), interorganisational coordination in distribution channels has not been the subject of extensive research (Frazier, 1983), despite being a potentially fundamental survival requirement (Dwyer and Oh, 1988). Transaction cost theory (Williamson, 1975, Williamson, 1993, Ouchi, 1980) has achieved a prominent role in the analysis of governance mechanisms for exchange relationships. However, the assumption of opportunism that underpins this perspective has been challenged. Specifically, in the marketing literature, Heide and John (1992) argue that norms play a central role in structuring relationships between firms and have produced empirical evidence to support this contention. In contrast, in the channel literature, Stern and El-Ansary (1992) argue that power is the major means available to achieve coordination and cooperation among channel members.
Building on their earlier work, Heide and John (1992) empirically explored the role of norms in structuring economically efficient relationships between independent firms. They examined the situation of a strong buyer facing a large number of small suppliers, finding that norms can serve as a governance mechanism, which safeguard against opportunistic behaviour in the presence of transaction-specific assets. However, questions remain as to the generalisability of these findings and the explanatory ability of the relational norm perspective vis-à-vis other theories. The current research seeks to address these issues by focusing on the inverse and compliment of the study of Heide and John (1992): namely, it investigates the role of relational norms in the situation of a strong supplier facing a large number of small buyers. The study also includes a number of additional theoretically specified explanatory variables. The specific context utilised for the research was that of the pharmacy — drug wholesaler dyad in Norway. This article is set out as follows. First, the relevant literature on transaction cost analysis (TCA), relational norms, and power-dependence theory is reviewed and, second, building on this theoretical base a set of hypotheses is proposed and operationalised in a multiple linear model. Third, the research study is described, the results analysed, and the hypotheses revisited. Fourth, the findings are discussed, with different theoretical perspectives being explored as a way of explaining the results. Finally, we deliberate on managerial implications and future research.
Section snippets
TCA
Transaction cost economics (TCE) or TCA (Williamson, 1975) refer to the organisation of economic activity “…within and between markets and hierarchies.” According to Barney and Ouchi (1988), it was Coase (1937) who proposed that firms exist because it is costly to use the price system to coordinate economic activity. He recognised that markets and firms (hierarchies) are alternative ways of organising economic exchanges and that uncertainty and opportunism increase the cost of using the price
Norms in exchange relationships
Vertical control has been suggested as a functional substitute for ownership in nonintegrated situations, although there is limited understanding of the conditions that enable a firm to establish vertical control in relationships between independent firms (Heide and John, 1992). Predicting the establishment of vertical control requires an explicit consideration of the conditions that allow control to be relinquished. Heide and John (1992) propose that the presence of certain strong relational
The hypotheses and research model
To assess whether relational norms act as a governance mechanism in the exchange dyad, vertical control between buyer and supplier was investigated. Vertical control is defined as the buyer's control over the supplier's decisions (cf. Heide and John, 1988). More specifically in this research, it is the decision-making control that the small buyer has established over the sole supplier. Now, from the theory, we assume that (1) dependence arises from investments in specific assets — because they
The context and data collection procedure
A survey was considered to be an appropriate method of data collection insofar it focuses on the generalisability over actors, while also being perceived as less obtrusive (e.g., McGrath, 1982). Accounting for the assumption that norms are bilateral expectations about a certain behaviour, data from the buyer side as well as from the supplier side of the dyad were collected. Pretests of the questionnaire were carried out in group discussions with buyer representatives. The resulting
Data analysis
The data analysis process consists of two phases. First, the reliability of the various measures was assessed, then a confirmatory factor analysis was performed to test the hypothesised second-order factor structure of the relational norms construct. (Heide and John (1992) proposed a second-order factor model for relational norms in accordance with theory and previous operationalisation of the norm concept.) The second phase involved an analysis of dependence between the criterion variable
Tests of hypotheses
Different regression models were tested for their ability to explain the association between the criterion variable, buyer decision control and the predictor variables: specific assets, relational norms, and the possible interaction between transaction-specific assets and relational norms. Finally, any effect from the control variables: size and location was accounted for. Each construct was represented by mean values of the items belonging to the constructs and used as input to the regression
Discussion
The conclusion of this research is that norms play a nonsignificant role in the exchange relationship between the buyers and their sole supplier. Moreover, the presence of asset specificity has been demonstrated on the hands of both exchange partners. In accordance with transaction cost theory, opportunistic behaviour could thus be expected. Yet, there seems to be little that indicates need for governance mechanisms to attenuate the effects of opportunism. One explanation for this might be that
Limitations of the study and further research
This research has a number of limitations, which delimit its findings. First, consistent with Heide and John (1992), the current study considered only the structural aspects of interfirm relationships: no direct performance measures were included and thus the efficiency considerations specified by TCA can only be inferred. Second norms were treated as exogenous (independent) variables and no attempt was made to ascertain the antecedents of relational norms. Third, the study has a number of
Conclusions
In this concluding section, we review the theoretical and managerial implications and contribution of the present research. We begin with the theoretical perspective and proceed to managerial implications. The evince that relational norms had no effect as a governance mechanism safeguarding against opportunistic behaviour in the presence of transaction-specific assets, yields the primary theoretical (and concomitant practical) implication of this research. Namely, that the occurrence of
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