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When do incentives work in channels of distribution?

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Abstract

The incentive dilemma refers to a situation in which incentives are offered but do not work as intended. The authors suggest that, in an interorganizational context, whether a principal-provided incentive works is a function of how it is evaluated by an agent: for its contribution to the agent’s bottom line (instrumental evaluation) and for the extent it is strategically aligned with the agent’s direction (congruence evaluation). To further understand when incentives work, the influence of two key contextual variables—industry volatility and dependence—are examined. A field study featuring 57 semi-structured depth interviews and 386 responses from twin surveys in the information technology and brewing industries provide data for hypothesis testing. When and whether incentives work is demonstrated by certain conditions under which the agent’s evaluation of an incentive has positive or negative effects on its compliance and active representation. Further, some outcomes are reversed in the high volatility condition.

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Notes

  1. We use “principal” and “agent” labels to conform to the dominant theory in the incentive field.

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Acknowledgments

The authors thank The Marketing Science Institute, the Global Technology Distribution Council and the National Beer Wholesaler Association for research support. The authors are listed in alphabetical order.

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  1. Colorado State University, College of Business, Fort Collins, CO, 80523-1278, USA

    David I. Gilliland

  2. Aston University, Birmingham, UK, B47ET

    David I. Gilliland

  3. Iowa State University, College of Business, Ames, IA, 50011-1350, USA

    Stephen K. Kim

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Gilliland, D.I., Kim, S.K. When do incentives work in channels of distribution?. J. of the Acad. Mark. Sci. 42, 361–379 (2014). https://doi.org/10.1007/s11747-013-0364-3

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