Journal of the Academy of Marketing Science

, Volume 38, Issue 4, pp 441–455 | Cite as

Control-based channel governance and relative dependence

  • David I. GillilandEmail author
  • Daniel C. Bello
  • Gregory T. Gundlach
Original Empirical Research


Control and governance theories recognize that exchange partners are subject to two general forms of control, the unilateral authority of one firm and bilateral expectations extending from their social bond. In this way, a supplier both exerts unilateral, authority-based controls and is subject to socially-based, bilateral controls as it attempts to manage its brand successfully through reseller channels. Such control is being challenged by suppliers’ growing relative dependence on increasingly dominant resellers in many industries. Yet the impact of supplier relative dependence on the efficacy of control-based governance in the supplier’s channel is not well understood. To address this gap, we specify and test a control model moderated by relative dependence involving the conceptualization and measurement of governance at the level of specific control processes: incenting, monitoring, and enforcing. Our empirical findings show relative dependence undercuts the effectiveness of certain unilateral and bilateral control processes while enhancing the effectiveness of others, largely supporting our dual suppositions that each control process operates through a specialized behavioral mechanism and that these underlying mechanisms are differentially impacted by relative dependence. We offer implications of these findings for managers and identify our contributions to channel theory and research.


Governance Control Dependence Distribution channels Coordination Conflict 


  1. Aiken, L. S., & West, S. G. (1991). Multiple regression: Testing and interpreting interactions. Newbury Park: Sage.Google Scholar
  2. Akerlof, G. A., & Kranton, R. E. (2005). Identity and the economics of organizations. Journal of Economic Perspectives, 19, 9–33.CrossRefGoogle Scholar
  3. Al-Najjar, N. I. (1995). Incomplete contracts and the governance of complex contractual relationships. AEA Papers and Proceedings, 85, 432–436.Google Scholar
  4. Anderson, E., & Weitz, B. (1992). The use of pledges to build and sustain commitment in distribution channels. Journal of Marketing Research, 29, 18–34.CrossRefGoogle Scholar
  5. Antia, K. D., & Frazier, G. L. (2001). The severity of contract enforcement in interfirm channel relationships. Journal of Marketing, 65, 67–81.CrossRefGoogle Scholar
  6. Antia, K. D., Bergen, M. E., Dutta, S., & Fisher, R. J. (2006). How does enforcement deter grey marketing incidence. Journal of Marketing, 70, 92–106.CrossRefGoogle Scholar
  7. Bello, D. C., & Gilliland, D. I. (1997). The effect of output controls, process controls, and flexibility on export channel performance. Journal of Marketing, 61, 22–38.CrossRefGoogle Scholar
  8. Benabou, R., & Tirole, J. (2003). Intrinsic and extrinsic motivation. The Review of Economic Studies, 70, 489–520.CrossRefGoogle Scholar
  9. Bergen, M., Dutta, S., & Walker, O. C. (1992). Agency relationships in marketing: a review of the implications and applications of agency and related theories. Journal of Marketing, 56, 1–24.CrossRefGoogle Scholar
  10. Black, D. (1998). The social structure of right and wrong. San Diego: Academic.Google Scholar
  11. Boyle, B., Dwyer, F. R., Robicheaux, R. A., & Simpson, J. T. (1992). Influence strategies in marketing channels: measures and use in different relationship structures. Journal of Marketing Research, 29, 462–473.CrossRefGoogle Scholar
  12. Brown, J. R., Dev, C. S., & Lee, D.-J. (2000). Managing marketing channel opportunism: the efficacy of alternative governance mechanisms. Journal of Marketing, 64, 51–65.CrossRefGoogle Scholar
  13. Caldieraro, F., & Coughlan, A. T. (2007). Spiffed up channels: the role of spiffs in hierarchical selling organizations. Marketing Science, 26(1), 31–51.CrossRefGoogle Scholar
  14. Casciaro, T., & Piskorski, M. J. (2005). Power imbalance, mutual dependence, and constraint absorption: a closer look at resource dependence theory. Administrative Science Quarterly, 50, 167–199.Google Scholar
  15. Celly, K. S., & Frazier, G. L. (1996). Outcome-based and behavior-based coordination efforts in channel relationships. Journal of Marketing Research, 33, 200–210.CrossRefGoogle Scholar
  16. Chen, Z. (2003). Dominant retailers and the countervailing power hypothesis. The RAND Journal of Economics, 34, 612–625.CrossRefGoogle Scholar
  17. Coughlan, A., Anderson, E., Stern, L., & El-Ansary, A. (2006). Marketing channels (7th ed.). Upper Saddle River: Pearson-Prentice Hall.Google Scholar
  18. Crocker, K. J., & Masten, S. E. (1988). Mitigating contractual hazards: unilateral options and contract length. RAND Journal of Economics, 19(3), 327–343.CrossRefGoogle Scholar
  19. Crowston, K. (1997). A coordination theory approach to organizational process design. Organization Science, 8, 157–175.CrossRefGoogle Scholar
  20. Deci, E. L., Koestner, R., & Ryan, R. M. (1999). A meta-analytic review of experiments examining the effects of extrinsic rewards on intrinsic motivation. Psychological Bulletin, 125(6), 627–668.CrossRefGoogle Scholar
  21. Eisenhardt, K. M. (1989). Agency theory: an assessment and review. Academy of Management Review, 14(1), 57–74.CrossRefGoogle Scholar
  22. Ellickson, R. C. (1987). A critique of economic and sociological theories of social control. Journal of Legal Studies, 16, 67–99.CrossRefGoogle Scholar
  23. Fehr, E., & Gachter, S. (2000). Fairness and retaliation: the economics of reciprocity. Journal of Economic Perspectives, 14, 159–181.CrossRefGoogle Scholar
  24. Frazier, G. L., & Rody, R. C. (1991). The use of influence strategies in interfirm relationships in industrial product channels. Journal of Marketing, 55, 52–69.CrossRefGoogle Scholar
  25. Gerhart, B., & Rynes, S. L. (2003). Compensation: Theory, evidence, and strategic implications. Thousand Oaks: Sage.Google Scholar
  26. Geylani, T., Dukes, A. J., & Srinivasan, K. (2007). Strategic manufacturer response to a dominant retailer. Marketing Science, 26, 164–178.CrossRefGoogle Scholar
  27. Gibbons, R. (2005). Incentives between firms (and within). Management Science, 51, 2–17.CrossRefGoogle Scholar
  28. Gibbs, J. P. (1994). A theory about control. San Francisco: Westview.Google Scholar
  29. Gilliland, D. I., & Bello, D. C. (2002). Two sides to attitudinal commitment: the effects of calculative and loyalty commitment on enforcement mechanisms in distribution channels. Journal of the Academy of Marketing Sciences, 30(1), 24–43.CrossRefGoogle Scholar
  30. Gilliland, D. I., & Manning, K. C. (2002). When do firms conform to regulatory control: the effect of control processes on compliance and opportunism. Journal of Public Policy and Marketing, 21, 319–331. Fall.CrossRefGoogle Scholar
  31. Gundlach, G. T. (1994). Exchange governance: the role of legal and nonlegal processes across the exchange process. Journal of Public Policy and Marketing, 13, 236–248.Google Scholar
  32. Gundlach, G. T., & Cadotte, E. R. (1994). Exchange interdependence and interfirm interaction: research in a simulated channel setting. Journal of Marketing Research, 31(4), 516–532.CrossRefGoogle Scholar
  33. Heide, J. B. (1994). Interorganizational governance in marketing channels. Journal of Marketing, 58, 71–85.CrossRefGoogle Scholar
  34. Heide, J. B., & John, G. (1992). Do norms matter in marketing relationships. Journal of Marketing, 56, 32–44.CrossRefGoogle Scholar
  35. Heide, J. B., Wathne, K. H., & Rokkan, A. I. (2007). Interfirm monitoring, social contracts, and relationship outcomes. Journal of Marketing Research, 44, 425–433.CrossRefGoogle Scholar
  36. Hermalin, B. E., & Katz, M. (1991). Moral hazard and verifiability: the effects of renegotiation in agency. Econometrica, 59(6), 1735–1753.CrossRefGoogle Scholar
  37. Holmstrom, B., & Milgrom, P. (1994). The firm as an incentive system. American Economic Review, 84, 972–991.Google Scholar
  38. Ittner, C. D., & Larcker, D. F. (2001). Assessing empirical research in managerial accounting: a value-based management perspective. Journal of Accounting & Economics, 32, 349–410.CrossRefGoogle Scholar
  39. Kaufmann, P., & Stern, L. (1992). Relational exchange, contracting norms, and conflict in industrial exchange. Advances in distribution channel research. Greenwich: JAI.Google Scholar
  40. Kumar, N., Scheer, L. K., & Steenkamp, J.-B. E. M. (1995). The effects of supplier fairness on vulnerable resellers. Journal of Marketing Research, 32, 54–65.CrossRefGoogle Scholar
  41. Larson, A. (1992). Network dyads in entrepreneurial settings: a study of the governance of exchange relationships. Administrative Science Quarterly, 37, 76–104.CrossRefGoogle Scholar
  42. Lorenz, E. (1999). Trust, contract, and economic cooperation. Cambridge Journal of Economics, 23(3), 301–315.CrossRefGoogle Scholar
  43. Lusch, R. F., & Brown, J. R. (1996). Interdependency, contracting, and relational behavior in marketing channels. Journal of Marketing, 60, 19–38.CrossRefGoogle Scholar
  44. Macneil, I. (1980). The new social contract: an inquiry into modern contractual relations. New Haven: Yale University Press.Google Scholar
  45. Mohr, J. J., Fisher, R. J., & Nevin, J. R. (1996). Collaborative communication in interfirm relationships: collaborative effects of communication and control. Journal of Marketing, 60, 103–115.CrossRefGoogle Scholar
  46. Nilakant, V., & Rao, H. (1994). Agency theory and uncertainty in organizations: an evaluation. Organization Studies, 15(5), 649–672.CrossRefGoogle Scholar
  47. Ouchi, W. G. (1979). A conceptual framework for the design of organizational control mechanisms. Management Science, 25, 833–848.CrossRefGoogle Scholar
  48. Palmatier, R. W., Dant, R. P., & Grewal, D. (2007). A comparative longitudinal analysis of theoretical perspectives of interorganizational relationship performance. Journal of Marketing, 71, 172–194.CrossRefGoogle Scholar
  49. Payan, J. M., & McFarland, R. G. (2005). Decomposing influence strategies: argument structure and dependence as the determinants of the effectiveness of influence strategies in gaining channel member compliance. Journal of Marketing, 69, 66–79.CrossRefGoogle Scholar
  50. Podsakoff, P. M., Mackenzie, S. B., Lee, J. Y., & Podsakoff, N. P. (2003). Common methods bias in behavioral research: a critical review of the literature and recommended remedies. Journal of Applied Psychology, 88(5), 879–903.CrossRefGoogle Scholar
  51. Prendergast, C. (1999). The provision of incentives in firms. Journal of Economic Literature, 37, 7–63.Google Scholar
  52. Raju, J., & Zhang, C. J. (2005). Channel coordination in the presence of a dominant retailer. Management Science, 24(2), 254–262.Google Scholar
  53. Rangan, K. V., & Bell, M. (2006). Transforming your go-to-market strategy: the three disciplines of channel management. Boston: Harvard Business School.Google Scholar
  54. Rindfleisch, A., & Heide, J. B. (1997). Transaction cost analysis: past, present, and future applications. Journal of Marketing, 61, 30–54.CrossRefGoogle Scholar
  55. Ring, P. S., & Van de Ven, A. H. (1994). Developmental processes of cooperative interorganizational relationships. Academy of Management Review, 19, 90–118.CrossRefGoogle Scholar
  56. Rubin, P. H. (1990). Managing business transactions: controlling the cost of coordinating, communicating, and decision making. New York: The Free.Google Scholar
  57. Scheer, L. K., & Stern, L. W. (1992). The effect of influence type and performance outcomes on attitude toward the influencer. Journal of Marketing Research, 29, 128–142.CrossRefGoogle Scholar
  58. Seeck, H., & Kantola, A. (2009). Organization control: restrictive or productive? Journal of Management & Organization, 15, 241–257.Google Scholar
  59. Shervani, T. A., Frazier, G. L., & Challagalla, G. (2007). The Moderating Influence of Firm Economic Power on the Transaction Cost Economics Model: An Empirical Test in a Forward Channel Integration Context. Strategic Management Journal, 28(6), 635–652.CrossRefGoogle Scholar
  60. Stern, L. W., & Weitz, B. A. (1997). The revolution in distribution: challenges and opportunities. Long Range Planning, 30(6), 823–829.CrossRefGoogle Scholar
  61. Wilkins, A. L., & Ouchi, W. G. (1983). Efficient cultures—exploring the relationship between culture and organizational performance. Administrative Science Quarterly, 28(3), 468–481.CrossRefGoogle Scholar
  62. Williamson, O. E. (1991). Comparative economic organization: the analysis of discrete structural alternatives. Administrative Science Quarterly, 36, 269–296.CrossRefGoogle Scholar
  63. Wuyts, S. H. K., & Geyskens, I. (2005). The formation of buyer-supplier relationships: detailed contract drafting and close partner selection. Journal of Marketing, 69, 103–117.CrossRefGoogle Scholar
  64. Zajac, E. J., & Olsen, C. P. (1993). From transaction cost to transaction value analysis: implications for the study of interorganizational strategies. Journal of Management Studies, 30, 131–145.CrossRefGoogle Scholar

Copyright information

© Academy of Marketing Science 2009

Authors and Affiliations

  • David I. Gilliland
    • 1
    • 2
    Email author
  • Daniel C. Bello
    • 3
  • Gregory T. Gundlach
    • 4
    • 5
  1. 1.Department of MarketingColorado State UniversityFort CollinsUSA
  2. 2.Aston UniversityBirminghamUK
  3. 3.Georgia State UniversityAtlantaUSA
  4. 4.American Antitrust InstituteWashington, DCUSA
  5. 5.University of North FloridaJacksonvilleUSA

Personalised recommendations