Abstract
The author applies a model based on transaction cost analysis to explain the vertical control selections made by a sample of exporters. The model, which obtains significant support, suggests that an important contingency when deciding on the desired level of vertical control in a particular instance, is the ability of the market to limit the opportunistic tendencies of outside intermediaries. In effect, the market’s ability to enforce contractual arrangements is often limited. When such enforcement cannot be relied upon, greater control represents a necessary alternative.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
Achrol, Ravi Singh, Torger Reve and Louis W. Stern. 1983. “The Environment of Marketing Channel Dyads: A Framework for Comparative Analysis.”Journal of Marketing 47 (Fall):55–67.
Anderson, Erin. 1985. “The Salesperson as Outside Agent, or Employee: A Transaction Cost Analysis.”Marketing Science 4 (Summer):234–254.
— and Anne Coughlan. 1987. “International Market Entry and Expansion via Independent or Integrated Channels of Distribution.”Journal of Marketing 51 (January): 71–82.
— and Hubert Gatignon. 1986. “Modes of Foreign Entry: A Transaction Cost Analysis and Propositions.”Journal of International Business Studies 11 (Fall):1–26.
— and Barton A. Weitz. 1986. “Make or Buy Decisions: A Framework for Analyzing Vertical Integration Issues in Marketing.”Sloan Management Review 27 (Spring):3–19.
Amour, Henry O. and David J. Teece. 1980. “Vertical Integration and Technological Innovation.”The Review of Economics and Statistics 62 (August):470–474.
Balakrishnan, Srinivasan and Birger Wemerfelt. 1986. “Technical Change, Competition and Vertical Integration.”Stratetic Management Journal 7: 347–359.
Beamish, Paul W, and John C. Banks. 1987. “Equity Joint Ventures and The Theory of The Multinational Enterprise.”Journal of International Business Studies 18 (Summer):1–16.
Bums, Tom and G.M. Stalker. 1961.The Management of Innovation. Tavistock Publications.
Cavusgil, S. Tamer. 1980. “On the Internationalization Process of Firms.”European Research 8(November):273–281.
Coase, Ronald H. 1937. “The Nature of the Firm.”Economica, N.S. 4:386–405.
Dess, Gregory G. and Donald W. Beard. 1984. “Dimensions of Organizational Task Environments.”Administrative Science Quarterly 29 (March):52–73.
Duncan, Robert B. 1972. “Characteristics of Organizational Environments and Perceived Environmental Uncertainty.”Administrative Science Quarterly 17(September):313–327.
Dwyer, F. Robert and M. Ann Welsh. 1985. “Environmental Relationships of the Internal Political Economy of Marketing Channels.”Journal of Marketing Research 22(November):397–414.
— and Sejo Oh. 1988. “A Transaction Cost Perspective on Vertical Contractual Structure and Interchannel Competitive Strategies.”Journal of Marketing 52(April):21–34.
Johanson, Jan and Jan-Erik Vahlne. 1977. “The Internationalization Process of the Firm—A Model of Knowledge Development and Increasing Foreign Commitments.”Journal of International Business Studies 10 (Spring):23–32.
Leblibici, Huseyin and Gerald R. Salancik. 1981. “Effects of Environmental Uncertainty on Information and Decision Processes in Banks.”Administrative Science Quarterly 26(December):578–596.
Leifer, Robert and George P. Huber. 1977. “Relations Among Perceived Environmental Uncertainly, Organization Structure, and Boundary-Spanning Behavior.”Administrative Science Quarterly 22(June):235–247.
Little, Robert W. 1970. “The Marketing Channel: Who Should Lead This Extracorporate Organization?”Journal of Marketing 34(January):31–38.
Macneil, Ian R. 1978. “Contracts: Adjustment of Long Term Economic Relations under Classical, Neoclassical and Relational Contract Law.”Northwestern University Law Review 72(March):854–906.
McManus, John. 1975. “The Cost of Altemative Economic Organization.”Canadian Journal of Economics (August):334–350.
Phillips, Lynn W. 1982. “Explaining Control Losses in Corporate Marketing Channels: An Organizational Analysis.”Journal of Marketing Research 22(November):525–549.
Reid, Stan. 1983. “Firm Internationalization, Transaction Costs and Strategic Choice.”International Marketing Review 2(Winter):44–56.
Reve, Torger. 1980. “Interorganizational Relations in Distribution Channels An Empirical Study of Norwegian Distribution Channel Dyads.” Ph.D. dissertation, Northwestern University.
Spekman, Robert E. and Louis W. Stem. 1979. “Environmental Uncertainty and Buying Group Structure: An Empirical Investigation.”Journal of Marketing 43(Spring):54–64.
Stem, Louis W. and Adel I. El-Ansary. 1982.Marketing Channels, 2nd edition. Englewood Cliffs, NJ: Prentice-Hall, Inc.
— and Torger Reve. 1980. “Distribution Channels as Political Economies: A Framework for Comparative Analysis.”Journal of Marketing 44(Summer):52–64.
Walker, Gordon and David Weber. 1984. “A Transaction Cost Approach to Make-or-Buy Decisions.”Administrative Science Quartely 29(September):373–391.
Williamson, Oliver E. 1975.Markets and Hierarchies: Analysis and Antitrust Implications, New York: Free Press.
— 1979. “Transaction-Cost Economics: The Govermance of Contractual Relations.”The Journal of Law and Economics 22:233–261.
—, 1985.The Economic Institutions of Capitalism. New York: Free Press.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Klein, S. A transaction cost explanation of vertical control in international markets. JAMS 17, 253–260 (1989). https://doi.org/10.1007/BF02729817
Issue Date:
DOI: https://doi.org/10.1007/BF02729817