Manufacturer–reseller e-business arrangements: The impact of inequity on relationship performance and the moderating role of dependence

Highlights

• We examine use of e-business tools between manufacturers and resellers.

• Ordering benefits reduce reseller perceptions of inequity in the relationship.

• Manufacturer's end user related information increases reseller perceptions of inequity.

• Perceived inequity negatively impacts the reseller performance.

• Inequity to performance link is moderated by reseller dependence on the manufacturer.

Abstract

Manufacturer–reseller e-business arrangements are changing the nature of channel relationships. When manufacturers supply e-business tools to their resellers, resellers may perceive that the benefits of technology are not shared equitably. This research explores this issue by examining two technology based antecedents of perceived inequity from the reseller perspective. We also examine the impact of perceived inequity on relationship performance, and the moderating role of reseller dependence on the proposed inequity–performance link. The results of the empirical test involving a sample of 224 resellers suggest that perceived inequity negatively impacts relationship performance, while reseller dependence plays a moderating role. Implications of these findings for researchers and managers are discussed.

Introduction

Firms are increasingly using e-business tools to transform channel relationships in order to achieve competitive advantage (Theodosiou and Katsikea, 2012, Wu et al., 2003). The e-business tools in the channel of distribution could be classified into three different categories: 1. reseller supplied; 2. third-party supplied; and 3. manufacturer supplied. An example of reseller supplied tools would be Wal-Mart's Retail Link®. The Retail Link is Wal-Mart's proprietary software system that is designed to track inventory, logistics and ordering information for Wal-Mart. Wal-Mart requires manufacturers to use Retail Link to monitor product movement across all Wal-Mart stores for ordering and inventory planning (http://walmartstores.com/suppliers/248.aspx). An example of third-party supplied tools would be industry consortia, such as GS1, that produces web-based scorecards and collaborative tools that manufacturers and resellers can jointly access (www.gs1.org). Finally, manufacturers can purchase web-based software and offer it to their resellers, such as Oracle's Siebel brand of Partner Relationship Management (PRM) software. For example, Renault used this system with their dealership network to improve overall communications, enhance dealer's responsiveness to their customer's requests, enhance technical support, and simplify business processes (Oracle, 2006). E-business tools are made available by the manufacturers to their resellers on manufacturer's web site. The distinguishing characteristic of the e-business tool from a regular manufacturer's website is that the e-business software allows the resellers to transact with the manufacturers, i.e. order products and services, apply for co-op advertising funds, track orders and shipments, and manage sales leads, among others (Bello et al., 2002, Theodosiou and Katsikea, 2012). This research focuses on the manufacturer supplied e-business tools in the context of manufacturer–reseller relationships.

Over the years, researchers understood the important role of information technology in the channels of distribution. For instance, O'Callaghan, Kaufmann, and Konsynksi (1992), in the context of EDI systems, note: “Interorganizational systems employing information technology may be the most important technological breakthrough in channels of distribution since air transport” (p.45). Twenty years later, this assertion still holds true. Although EDI systems are not considered cutting edge technology and have been increasingly replaced by more flexible, user friendly and cost-effective web based software packages called e-business tools (Bello et al., 2002), the interorganizational information systems are more ubiquitous than ever. These types of web-based software packages have been surveyed in previous research (Bello et al., 2002, Lee et al., 2011, Mirani et al., 2001, Osmonbekov, 2010). These studies examine the ways that the use of web-based e-business tools offer new benefits and drive value to the parties in the relationship. While these benefits to manufacturers and their business partners are well understood, there is limited understanding on how these new arrangements impact the manufacturer–reseller relationship and down-stream partner performance. While the general assumption is that benefits accrue to all parties due to lower costs, improved communications, streamlined processes, and web-based accessibility, issues surrounding channel power, ownership of information, and opportunism arise. For example, information technology theorists suggested that technology could be used to extend the firm's strategic control beyond the borders of the company to its partners and channel members (Konsynski, 1993). This is done through collecting information to understand the marketplace and strategically acting upon the information gathered to influence marketplace developments (Konsynski, 1993).

Previous research has examined either antecedents (O'Callaghan et al., 1992, Osmonbekov, 2010) or consequences (Bello et al., 2002; Konsynksi 1993; Lee et al., 2011, Mirani et al., 2001, Osmonbekov et al., 2002, Srinivasan et al., 2002) of technology adoption in the channels of distribution. A couple of studies examined both antecedents and consequences of technology adoption (Theodosiou and Katsikea, 2012, Wu et al., 2003). However, previous studies have not examined the impact of technology adoption on perceived inequity (see Table 1 for summary of the literature review) although perceived inequity is identified as a very important construct by previous research in interorganizational relationship research (Frazier, 1983, Kumar et al., 1995, Samaha et al., 2011, Scheer et al., 2003, Sollner, 1999). Additionally, the way(s) that e-business adoption could change the relationship dynamics has not been studied in the channel context. As e-business tools are becoming the de-facto means for interorganizational information sharing, communication, and payment systems, it also becomes very important to examine the impact of these changes on the relationship itself. Consequently, the need for empirical research on e-business in the channels context is compelling, and several questions arise. For example, what are the perceptions of the partners on the equitable sharing of the benefits of the new technology? What drives these perceptions and what impact does it have on the relationship performance?

This research attempts to answer these important questions from the reseller perspective and to contribute to existing marketing literature in four ways. First, it contributes to the emerging literature on e-business technology (Osmonbekov, 2010, Srinivasan et al., 2002, Theodosiou and Katsikea, 2012, Wu et al., 2003) by examining the impact of e-business technology on the buyer–seller relationship. Second, the study investigates the antecedents of perceived inequity of e-business arrangements from a reseller's perspective. Prior business-to-business research have primarily focused on the consequences of inequity such as relationship quality (Kumar et al., 1995) hostility, distrust and relationship continuity (Scheer et al., 2003), and commitment (Sollner, 1999). Third, the impact of perceived inequity on performance has not been previously studied, especially in the context of e-business linkages in the distribution channel. Fourth, this study examines the moderating role of reseller dependence of the perceived inequity–performance linkage. To achieve these objectives, the study develops and tests a theoretical model by drawing from marketing channel and equity theory as well as insights gained from 28 in-depth interviews with managers at reseller firms.