Abstract
We develop a conceptual model for studying the antecedents and consequences of achieved and optimal levels of manufacturer–distributor (M–D) cooperation. We hypothesized that levels of market turbulence, competitive intensity, and the manufacturing firm’s strategic type (i.e., prospector, analyzer, or defender) affected the optimal level of M–D cooperation. We also hypothesized that the level of under- and overachieving the optimal levels of cooperation negatively affects firm performance. The conceptual model is tested using empirical data collected from 295 manufacturing firms in the U.S. and validated using data collected from 104 distributors in the U.S. We also collect data from 255 Japanese manufacturing firms and 98 Japanese distributors. The empirical results support the model’s hypotheses with only one unexpected finding: in the Japanese sample, overachieving the optimal level of cooperation has a greater negative effect on performance than underachieving. We conclude by discussing theoretical and managerial implications.
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Notes
Field interviews with managers from the U.S. and Japan confirmed the managerial relevance and importance of our study. We also used these interviews to complement our theoretical development and to pretest our research instruments.
Industries included: food products, textiles, furniture, paper and allied products, chemicals, printing, electronics, rubber and plastic, metal, mechanical, industrial machinery and equipment, transportation, telecommunication equipment, and instrument related products.
The Japan coefficients were obtained by adding the dummy variable effects. For prospectors, the Japan coefficient is PROSPECTOR + PROSPECTOR*C, or 2.08−0.78 = 1.30. The other coefficients are similarly calculated.
Note: we ran the same analyses using ROS and ROA as performance measures, and the results were similar to those found for ROI; these results are available upon request.
As shown in Table 4, the overfit coefficient for Japan is the coefficient for LOG_OVERFIT + the coefficient for LOG_OVERFIT*C, or −2.01 + (−1.69) = −3.70. Similarly, the underfit coefficient for Japan is LOG_UNDERFIT + LPG_UNDERFIT*C = −1.41 + (−0.07) = −1.48.
The Table 3(a)"" coefficients are interpreted as follows. The trust effect for each country is taken as the sum of the Trust coefficient plus the Trust*C coefficient. For the U.S., this is (0.13 + 0), and for Japan this is (0.13 + 0.24). Since both coefficients are significant, it indicates that trust is significantly related to achieved level of cooperation for both countries, but the effect is higher in Japan since the interaction term is significant. The same interpretation holds for the other independent variables.
We thank a reviewer for this insightful comment, and for many other helpful suggestions throughout the concluding sections of this paper.
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Acknowledgement
The authors wish to thank Ms. Marsha Ma for managing four research assistants during the data collection process of this research project, and the anonymous reviewers for their helpful comments.
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Appendices
Appendix
Study Measures
Part A: Data collected from SBU managers and the distributors
Achieved level of cooperation
(Construct reliability, 0.71 for U.S. and 0.84 for Japan); adopted from Anderson and Narus (1990); Morgan and Hunt (1994).
How would you characterize the current level of cooperation between your company and this distributor regarding the following activities (anchors: 1 = very low/7 = very high)?
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1.
Local cooperation
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2.
Regional cooperation
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3.
National cooperation
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4.
International cooperation
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5.
Inventory level cooperation
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6.
Determining promotion programs for new products
[We collected data from 295 manufacturing firms in the U.S. and 255 Japanese manufacturing firms. To assess the validity of the data provided by these manufacturing firms, we also collected data from 104 distributors in the U.S. and 98 Japanese distributors. Because the Chao-test results indicated that there were no statistical significant differences between the two perspectives, we reported only the results based on the perspective of manufacturers.]
Part B: Data collected from SBU managers
Trust
Seven-point Likert Scale: (1 = strongly disagree/7 = strongly agree); (construct reliability, 0.82 for U.S. and 0.70 for Japan); adopted from Anderson and Narus (1990); Morgan and Hunt (1994)
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1.
The level of trust our company has in its working relationship with this distributor is very high.
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2.
In our relationship, this distributor cannot be trusted at times. (R)
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3.
In our relationship, this distributor can be counted on to do what is right.
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4.
In our relationship, this distributor has high integrity.
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5.
The distributor keeps promises it makes to our firm.
Shared values
Seven-point Likert Scale: (1 = strongly disagree/7 = strongly agree); (Construct reliability, 0.87 for U.S. and 0.86 for Japan); adopted from Heide and John (1992); Morgan and Hunt (1994)
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1.
To succeed in this business, it is often necessary to compromise one’s ethics.
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2.
The parties should make adjustments in the ongoing relationship to cope with changing circumstances.
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3.
It is expected that we keep each other informed about events or changes that may affect the other party.
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4.
The parties are committed to improvements that may benefit the relationship as a whole, and not only the individual parties.
Commitment
Seven-point Likert Scale: (1 = strongly disagree/7 = strongly agree); (Construct reliability, 0.72 for U.S. and 0.76 for Japan); adopted from Anderson and Weitz (1992); Morgan and Hunt (1994)
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1.
Our relationship with this distributor is a long-term alliance.
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2.
This distributor is willing to dedicate whatever people and resources it takes to grow sales of our products.
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3.
The relationship that my firm has with this distributor is something we are very committed to.
Top management support
Seven-point Likert Scale: (1 = strongly disagree/7 = strongly agree); (Construct reliability, 0.81 for U.S. and 0.77 for Japan); adopted from Jaworski and Kohli (1993)
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1.
Top managers repeatedly tell employees that our survival depends on a good relationship with our distributors.
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2.
Top managers often tell employees to be sensitive to the activities of our distributors.
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3.
Top managers repeatedly emphasize the importance of having a good relationship with our distributors.
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4.
Top management formally promotes M–D cooperation
Reward system
Seven-point Likert Scale: (1 = strongly disagree/7 = strongly agree); (Construct reliability, 0.86 for U.S. and 0.87 for Japan); adopted from Jaworski and Kohli (1993)
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1.
Distributor satisfaction assessments influence senior managers’ pay in our company.
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2.
Formal rewards (i.e., pay raise, promotion) are forthcoming to anyone who consistently provides good market intelligence to our distributors.
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3.
Salespeople’s performance in our company is measured by the strength of relationships they build with distributors.
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4.
Distributor satisfaction is a major component of our performance evaluation.
Market turbulence
Seven-point Likert Scale: (1 = strongly disagree/7 = strongly agree); (Construct reliability, 0.70 for U.S. and 0.83 for Japan); adopted from Jaworski and Kohli (1993)
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1.
In our kind of business, customers’ product preferences change quite a bit over time.
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2.
Our customers tend to look for new products all the time.
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3.
We are witnessing demand for our products and services from customers who never bought them before.
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4.
New customers tend to have product-related needs that are different from those of our existing customers.
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5.
We cater to many of the same customers that we used to in the past. (R)
Competitive intensity
Seven-point Likert Scale: (1 = strongly disagree/7 = strongly agree); (Construct reliability, 0.73 for U.S. and 0.87 for Japan); adopted from Jaworski and Kohli (1993)
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1.
There are many “promotion wars” in our industry.
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2.
Competition in our industry is cutthroat.
Part C: Data collected from top management
Performance:
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1.
ROI: What is the return on investment in this business unit? ____ %
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2.
ROS: What is the return on sales in this business unit? ____ %
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3.
ROA: What is the return on assets in this business unit? ____ %
Optimal level of cooperation
(Construct reliability, 0.77 for U.S. and 0.73 for Japan); adopted from Morgan and Hunt (1994) and Anderson and Narus (1990).
[Cooperation between a business unit and its distributors could occur in many areas such as local cooperation, regional cooperation, national cooperation, international cooperation, inventory level cooperation, and determining promotion programs for new products. For this research, optimal cooperation is defined the necessary level of cooperation between the business unit and the distributor in order to maximize profitability of the business unit. For this section, we are interested in your assessment of the optimal level of cooperation between this business unit and the selected distributor.]
Please suggest an optimal level of cooperation between this business unit and this distributor regarding the following activities. (Anchors: 1 = very low/7 = very high)
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Local cooperation
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Regional cooperation
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National cooperation
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International cooperation
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Inventory level cooperation
-
Determining promotion programs for new products
Organizational strategy
Scale used in DeSarbo et al. (2006), originally adopted from Conant et al. (1990). (Please see DeSarbo et al. (2006) for a complete list of scale items in this scale.
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Song, M., Di Benedetto, C.A. & Zhao, Y. The antecedents and consequences of manufacturer–distributor cooperation: an empirical test in the U.S. and Japan. J. of the Acad. Mark. Sci. 36, 215–233 (2008). https://doi.org/10.1007/s11747-007-0074-9
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DOI: https://doi.org/10.1007/s11747-007-0074-9