Manufacturer–reseller e-business arrangements: The impact of inequity on relationship performance and the moderating role of dependence
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.
Section snippets
E-business arrangements in distribution channels
As described in the Introduction, e-business arrangements similar to that enjoyed by Renault are becoming quite common in modern distribution channels. Modern PRM software streamlines and automates many business processes along the value chain (Theodosiou & Katsikea, 2012). Specifically, in the manufacturer–reseller relationship the software enables automatic reordering of previous orders saved on the system, configuring the right order based on preset ordering specifications, automatic pricing
Equity theory
Equity theory deals with the norm of distributive justice in dyadic relationships and reflects the desire of members of a dyad to have a fair distribution of benefits in a dyadic relationship (Adams, 1963, Huppertz et al., 1978, Yilmaz et al., 2004). Equity theory has been most developed in the field of organizational behavior, with the focus made on the effects of unfair treatment of employees on their job performance. Adams (1963) introduced equity theory to explain how employees respond both
Theoretical model and hypotheses
The model (Fig. 1) reflects our thesis that e-business arrangements could be perceived by the reseller as a “double-edged sword.” Using a grounded theory approach (Glaser & Strauss, 1999), two themes emerged from the depth interviews. First, the reseller enjoys the benefits of a more efficient ordering process; while secondly, the reseller perceives that it is giving up some strategic information to the manufacturer in the process as part of the exchange. This tension is reflected in reseller's
Moderating role of reseller dependence
Dependence is an important part of any relationship and has occupied a central role in channels research (Hewett & Bearden, 2001). Reseller dependence is defined as perceptions of the reseller about difficulty of replacing the manufacturer as a supplier of product lines as well as the income and profit generated from those product lines, if the relationship is broken (Gundlach & Cadotte, 1994). Although a reseller may perceive high inequity in sharing the benefits from e-business arrangements,
Pilot study and field interviews
As noted earlier, the empirical test is focused on the perspective of a reseller in the e-business adoption process. First, the software companies and products that are focused on providing e-business tools to a channel were examined. Several software firms were visited, the functionality of their packages was studied, and demonstrations of their products were observed. This was an important step, as these companies (e.g. Siebel Systems) conduct research in manufacturer–reseller interactions in
Data analysis and results
The data analysis follows a standard procedure in structural equation modeling recommended by Anderson and Gerbing (1988). The first stage examines the measurement model and examines validity of the measures. Using Amos 5.1 software, a confirmatory factor analysis with the 17 measures was conducted to statistically assess the discriminant and convergent validity of the five constructs in question (Table 2). Means, standard deviations and correlations among constructs are provided in Table 3.
The
Testing for moderation
H5 was tested using a 3-step hierarchical regression following a general procedure for testing for moderation suggested by Baron and Kenny (1986). The first step of the regression simply models inequity as the independent variable and relationship performance as the dependent variable. The second step of the regression adds reseller dependence as an additional independent variable. In the third step of the regression, a cross-product term of inequity and reseller dependence was used to capture
Discussion
The main purpose of the present study was to contribute to the growing literature on e-business technology (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. Equity perceptions seem to be important in implementing novel channel arrangements, such as e-business tools, as suggested in previous channel research (Frazier, Spekman, & O'Neal, 1988). In general, the findings support the thesis
Future research and limitations
Our research focused on one type of e-business tools, the one that connects manufacturers with its resellers and provided by the manufacturer for use by its resellers. Other types of relationships were not examined in this research and future research could explore e-business related issues in other contexts. For example, how do the interorganizational dynamics change, when the third party provider of e-business tools enters the picture? What happens to inequity perceptions of multiple parties
Managerial implications
As manufacturers continue to migrate their resellers to online interfaces they should consider potential negative effects from such migration. The results of our study suggest that one of such effect could be increased perceptions of inequity by resellers and possible deterioration in the relationship performance. Although relationship performance in this study was measured from the reseller's perspective, it also implies that the reseller is selling less of the manufacturer's products. To
Talai Osmonbekov is an Associate Professor of Marketing at The W. A. Franke College of Business of Northern Arizona University. He obtained his Ph.D. in Marketing from Georgia State University's Robinson College of Business. His research interest is technology empowered customer relationships. His articles appeared in the Journal of the Academy of Marketing Science, Industrial Marketing Management, and Journal of Business Research among others.
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Cited by (0)
Talai Osmonbekov is an Associate Professor of Marketing at The W. A. Franke College of Business of Northern Arizona University. He obtained his Ph.D. in Marketing from Georgia State University's Robinson College of Business. His research interest is technology empowered customer relationships. His articles appeared in the Journal of the Academy of Marketing Science, Industrial Marketing Management, and Journal of Business Research among others.
Tom Gruen is a professor and chair of the marketing department at the Peter T. Paul College at University of New Hampshire. He holds Ph.D., MS, and MBA degrees in Marketing from Indiana University's Kelly School of Business. His research focuses on the management of customer relationships and his articles appeared in Harvard Business Review, Journal of Marketing, Journal of the Academy of Marketing Science, Journal of Retailing, and Journal of Applied Psychology among others.
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