See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/5222269

Manufacturer–Overseas Distributor Relations and Export Performance

Article  in  Journal of International Business Studies · February 1982

DOI: 10.1057/palgrave.jibs.8490550 · Source: RePEc

CITATIONS READS

197 813

2 authors:

Philip Rosson David Ford

Dalhousie University Kedge Business School
46 PUBLICATIONS   1,151 CITATIONS    85 PUBLICATIONS   7,872 CITATIONS   

SEE PROFILE SEE PROFILE

All content following this page was uploaded by Philip Rosson on 23 May 2014.

The user has requested enhancement of the downloaded file.

MANUFACTURER-OVERSEASDISTRIBUTORRELATIONS
AND EXPORT PERFORMANCE

PHILIPJ. ROSSON*
Dalhousie University
I. DAVIDFORD**
Universityof Bath

Abstract. The export arrangement which makes use of overseas distributors is examined in
this article. Although this method is importantfor many manufacturersoperating in foreign
markets there are reservations about the performance levels that are achieved under such
arrangements. It is suggested that there is an importantlink between the performance level
achieved and the very nature of the relationship that exists between the manufacturer and
overseas distributor.The authors assert also that the nature of the manufacturer-overseas
distributor relationship is associated with certain characteristics of the participating com-
panies; namely, their stake in the relationship, their experience, and their uncertainty sur-
rounding the relationship. These propositions are tested and largely corroborated through
analysis of data collected from 41 companies in Canada and the UK.

M*Overseas distributors are an important fact of life for many manufacturers INTRODUCTION
involved in international business, and it has been claimed that "the majority of
export sales in the free world today are conducted through independent distribu-
tors." [Business International no date, p. 1] Furthermore, this exporting method is
particularly important to smaller companies and those relatively new to overseas
trading for these firms seldom have the necessary scale of operations, financial
resources, experience, or confidence to operate more directly in foreign markets.
[Duguid and Jacques 1971; Tookey 1975] In view of this importance, it is surprising
to find that so little empirical research has been conducted into this exporting
method. This article reports findings from a study which examined the nature of
the relationships that exist between manufacturers and their distributors in ex-
port marketing channels.

The manufacturer-overseas distributor (M-D) arrangement-like other market en- THE

try and operating modes-has certain associated benefits and costs for the com- MANUFACTURER-
OVERSEAS
pany that wants to sell in a particular foreign market. The main benefit is that
DISTRIBUTOR
relatively inexpensive and immediate representation is gained through the use of EXPORTING
an overseas distributor. Against this benefit, however, has to be set the cost that
ARRANGEMENT
results from reduced control over the foreign marketing operations when com-
pared with exporting through wholly owned sales subsidiaries. Control is reduced
because the exporter has no permanent presence in the overseas market, save
that provided by the distributor. The distributor is a company that is independent
of the manufacturer, and the goals and interests of independent companies sel-
dom mesh exactly. For this reason, the way in which certain marketing activities
are performed by the distributor-for example, sales coverage, product servicing,
providing market information-may fall short of the exporter's expectations. The
exporter will still be anxious to ensure that sales and profits will grow as planned.
The exporter's dilemma then is, that although high performance in the foreign
market is desired, the lack of absolute control over marketing means that the ex-
porter is partially dependent on another company to achieve its aims.

*Philip J. Rosson is an Associate Professor of Marketingin the School of Business Admin-

istration, Dalhousie University,Halifax, Canada.
**I. David Ford is a Lecturerin the School of Management, Universityof Bath, England.

Journal of International Business Studies, Fall 1982 57

Palgrave Macmillan Journals

is collaborating with JSTOR to digitize, preserve, and extend access to
Journal of International Business Studies ®
www.jstor.org
 The distributor also plays an active role in the trading relationship. Because they
usually represent more than one manufacturer, overseas distributors develop a
notion of what is expected of them; and in turn, what they should expect of manu-
facturers. These expectations increase the delicacy of the exporters' task in
achieving high performance from their overseas distributors. The companies'
ideas of organizational rights and obligations and the attempts by each party to
influence the other play a part in fashioning the transactions between exporter
and overseas distributor.
The M-Drelationship begins when the two firms see mutual benefit from the ex-
ploitation of a business opportunity, but the possibility of tension and conflict
exists as each independent party bargains in an effort to meet its own goals. The
most accurate conceptualization of interorganizational relations of this kind is
that they display "mixed-motives." [Schmidt and Kochan 1977, p. 221] That is to
say, relations can be at the same time cooperative and conflicting. In turn, this
suggests that power and conflict deserve attention from the researcher in this
field. Thus, one can see that the exchange process between manufacturer and
overseas distributor is a dynamic and political one because two active, indepen-
dent, and goal-directed firms are involved.
While these points are intriguing, they are not distinctively international for the
exchange process described so far could just as well characterize M-Drelation-
ships in domestic channels as those in exporting channels. The distinctiveness
of M-Drelations in exporting channels follows from the "distance" which exists
between the two interdependent companies. This "distance" is defined as the
sum of factors preventing flows of information and understanding between seller
and buyer and includes geographic, cultural, and social elements. [Hallen and
Wiedersheim-Paul 1979; Johansson and Wiedersheim-Paul 1975] The importance
of distance is indicated by Abdel-Malek[1974],whose findings showed that Cana-
dian export manufacturers regarded overseas channel intermediaries as less
easy to communicate with, less prompt, less aggressive, less dependable, and
less competent than Canadian intermediaries.
The problem of distance is more severe in M-Drelationships when compared with
the situation of a multinational producer dealing with an overseas subsidiary.
[See Brandt and Hulbert 1979] This severity stems first from the fact that the two
companies are rather loosely connected. Such independence makes controls
less easily established than in, say, a joint-ventureoperation. Yet without contact,
the problems of distance are likely to persist and to impede high performance. A
second reason explaining the potential severity of distance in M-D relations
results from the fact that many manufacturers use this method early in their in-
ternational business operations. When this is so, the manufacturer has little or
no prior experience to draw upon.
Additionally, it is important to distinguish between "establishment" and "main-
tenance" functions in M-Drelationships. The nature of a relationship is likely to
be a product of both the characteristics the companies brought to the relation-
ship initially, as well as those characteristics that result from interaction within
the relationship. Consider, for example, how prior international trading experi-
ence might shape a relationship at the outset and how the history of intercom-
pany dealings will likely change the initial structuring of the relations.

These ideas on the nature of the dealings between manufacturers and their over-
THECONCEPTUAL
MODEL seas distributors lead to the development of a conceptual model of M-Drelation-
ships.
These relationships, shown in Figure 1, form part of a more general model of the
development of buyer-seller relationships, which has been published elsewhere.
[Ford and Rosson 1981] The model presented here has three components: partici-

58 Journal of International Business Studies, Fall 1982

 FIGURE1
The Conceptual Model of Manufacturer-Overseas
Distributor Relations and Export Performance

Participant Relationship
Variables Dimensions Outcomes

Stake > -->- Performance

Formalization
Standardization
Experience > Reciprocity
Intensity
Conflict
Uncertainty >

pant variables, relationship dimensions, and the single outcome component-

performance.

Three participant variables are discussed: Stake, Experience, and Uncertainty. Participant
"Stake" is a measure of the importance of the relationship to each party;that is, Variables
it indicates what each company has already invested and what would be lost if
the relationship failed. To the extent that this indicates a company's dependence
on its partner, stake is a partial measure of the other company's power1 over it.
[Emerson 1962] The argument made here, then, is that a link exists between
stake, dependence, and the potential for the exercise of power. That the stake of
manufacturer and overseas distributor affects their relations is suggested by a
number of writers. Terpstra [1972] notes that the interests of the two parties may
not always coincide, especially if the exporter's products represent only a small
proportion of the distributor's total business-that is, where, the distributor has
low stake in the association. Further, a Business International survey found
some M-Drelationships were "of the most tenuous and lackadaisical sort, while
others-where there is a substantial and profitable business relationship-are
very close indeed." [1970, p.3]
The second participant variable is that of "experience." The relationship between
the two companies is seen as being affected by the experience both of the organ-
izations and of individual boundary-spanning managers. For example, manufac-
turers that have sizable overseas distributor networks might standardize their
procedures for dealing with distributors because experience has shown that a
particular approach is most satisfactory. This practice may contrast with that of
a less experienced company that bargains terms with each distributorindividually.
Personal experience within the M-Drelationship is also likely to shape channel
relations through the familiarity and trust that result from repeated business (and
social) interaction, as well as personal conflicts that can arise from personality
or cultural differences. [Ford 1980; Van de Ven 1976] The position occupied by the
key contacts in the exporting and distributor firms is a critical one for each
stands between his own organization and the representative of its dyadic part-
ner. In view of this fact, it is likely that the mutual experience of these boundary-
spanners will shape the interfirmrelationship itself.
The final participant variable considered is "uncertainty."Writings in a number
of fields support its consideration. Hirsch [1972] found that demand uncertainty
was a major factor explaining both the structure and processes of interorganiza-
tional relations in the book, film, and record industries. Marketing channel
research points to similar conclusions. For example, Etgar [1977] found that
channel leaders tend to emerge when channels face threatening environments-

Journal of International Business Studies, Fall 1982 59

0

-0
=3

0O

57
CD
:3 TABLE 1
Variable Definition and Operationalization
0)
1. Participantvariables
CD Stake
Definition -What a party (or the parties) stands to lose if the relationship is terminate
CD Measures -% of M's total sales - UK sales x
through D* Total sales
0cn % of D's total sales - M's sales
CD x
Q. through M* Total sales
CD Experience
-n Definition -Knowledge based upon past and current corporate and personal observati
l) Measures -a) corporate
no. of overseas contracts -the number of overseas agents and
(D
0o and D deal with, respectively
ro
b) personal
years of personal contact -the number of years that the key con
each other
Uncertainty
Definition -The extent to which business processes and outcomes are unpredictable.
Measure -industry change -5-point scale, range (1) very stable, to
puted over seven items-for examp
competitors' strategies, technical dev
-future plans -the extent to which the manufacture
tual), continued, or less involved (less
-for manufacturer (1) work closer w
in UK-for distributor(1) work closer
facturer
2. Relationship dimensic)ns
Formalization:
Definition -The extent to which the terms of the relationship are agreed upon and ma
Measure -agreement formality -3-point scale, range (1) verbal agreem
 Standardization:
Definition -The extent to which the established roles and trading routines are adhered
Measure -stability of roles and routines -3-point scale, range (1) fixed, to (3) ch
Reciprocity:
Definition -The extent to which the manufacturerand distributor are both involved in d
domains of each party.
Measure -decision making in the dyad -5-point scale, range (1) made by distr
10 decision items. Average score co
sample average regarded as display
ing. Dyads with extreme scores rega
Intensity:
Definition -The level of contact and resource exchange between the parties.
Measures -a) contact intensity
no. of letters -number of letters exchanged by man
no. of visits -the number of visits made to each
biannually
other contact frequency -the frequency with which the contac
the manufacturer/distributorfirm, oth
c-
C- -b) resource intensity
support materials* -the sum of separate types of suppor
stock carried* -the value of stock of the manufacture
effort expended -5-point scale, range (1) much less, to
5" relationship compared to others enga
Conflict:
3
Definition -The perceived level of tension and disagreement between the two parties.
Measure -conflict frequency -6-point scale, range (1) never, to (6) v
O3
3. Outcomes
C Performance:
c Definition -The accomplishments-real and perceived, that have resulted from the ma
U)
Measures -UK sales trend -5-point scale, range (1) declining sha
o.CD
C) years
CD
Ci)
-UK sales level -the current annual level of sales of th
.cn

*For these measures, the unit of analysis is either the manufactureror the distributor. All other meas
CD
turer and distributorviews and experiences.

00
N)

C0
 one component of which was demand uncertainty. Ford's [1978] comparative
study of two distribution channels showed that the more recently formed and
growing (more uncertain) channel system displayed less well developed norms of
behavior and more exercise of power than the system that faced a more certain
environment.
In the field of institutional economics, Williamson [1975] argues that when uncer-
tainty is experienced under market exchange-the M-Darrangement, for exam-
ple-disequilibrium and inefficiency result because this exchange method lacks a
directing force. A furtheraspect of uncertainty,which is importantin the M-Dcase,
is that which may be generated by differences between the companies in their
views of the importance of the relationship, its current position, and their plans
for its future. The closeness of the two companies' plans for the future of the rela-
tionship is regarded as a measure of their "mutuality"and is referred to later.

Relationship Aside from "conflict," the relationship dimensions used are those identified by
Dimensions Marrett[1971] in her review of studies of relations between public agencies. The
decision to adopt these dimensions was based upon several factors. First, a
number of researchers have successfully embraced these dimensions in recent
empirical studies of interorganizational relations. [Aldrich 1976; Schmidt and
Kochan 1977] Second, Reve [1978] has proposed a very similar set of dimensions
to describe relations among members of marketing channels. Third, preliminary
field work suggested that Marrett'sdimensions were valid descriptors of the M-D
relations under study. In view of these points, the four dimensions-formaliza-
tion, standardization, reciprocity, and intensity-were adopted. The inclusion of
conflict as a relationship dimension followed from the view expressed earlier-
that M-Ddyads exhibit mixed motives. This, in turn implies that tension and dis-
agreement may be a prevailing condition of such relations. [Stern and Reve 1980,
p. 58] Each of these five dimensions is defined and operationalized in Table 1, as
are the variables "stake," "experience," "uncertainty,"and "performance."
The nine variables just described are operationalized through 18 measures
shown in Table 1, which were drawn from the larger set shown in Table 2. The
selection of these particular measures as "most appropriate," resulted either
from inspection of the measure correlation matrix or from factor analysis results.
As a result of this discussion, two linked questions were addressed in the
research undertaken and reported here. The most important of them is: "what are
the characteristics of the relationships between manufacturers and overseas dis-
tributors that are associated with high levels of performance?" This is a major
issue, since the view widely voiced in the literature is that good performance can
be a problem under the M-Dexporting arrangement. [See, for example, Bickers
1971; Business International 1970; Cateora and Hess 1975.] A second question
follows from the first: "To what extent are the relationships between manufac-
turers and their overseas distributors shaped by certain characteristics of the
two companies and their individual representatives (that is, the participant vari-
ables)?" Again, this issue merits attention, for relationships do not simply hap-
pen, rather they result from interplay between the parties involved.

RESEARCH These questions are examined by analyzing first the association between the re-
HYPOTHESESlationship dimensions and performance, and second the association between
the participant variables and relationship dimensions. The hypothesized associa-
tion between each of the five relationship dimensions and performance is shown
in Table 3. Essentially, high performance is regarded as associated with greater
standardization, reciprocity, and intensity, and with lower conflict. An associa-
tion with formalization is hypothesized, but no direction is stated. The hypothe-

62 Journal of International Business Studies, Fall 1982

 TABLE 2
Full Listing of Variable Measures

Stake Standardization
Time to replace D/M Stability of roles and routines*
Importance of DIM Reciprocity
% of M's total sales through D* Decision making in the dyad*
% of D's total sales through M* Spot decision-making authority
% of M's export sales through D Intensity-Contact
% of D's import sales through M Numberof letters*
Importanceof the business of M/D Number of phone calls
Experience-Corporate Number of visits*
Number of overseas contacts* Number of telex messages
Years of international trading Number of company linkages
Years of Canada/UKtrading Other contact frequency*
Years M-Drelationship established -Resource
Relationship contact level Support materials*
-Personal Use of M's logo
Contact age Stock carried*
Years of personal contact* Training
Workexperience overseas Effort expended*
Days traveling overseas Conflict
Overseas trading experience Conflict over objectives
Schooling Conflict frequency*
Company experience Decision area conflict
Uncertainty Conflict description score
Profit objectives realized Comparative conflict in relationship
New product activity Resolution frequency
UKcompetition Performance
R&Dexpenditures UK sales trend*
Industrychange* UKsales level*
Future plans* Sales satisfaction
Formalization Cooperation
Agreement formality* Overall satisfaction

*Measures used in the analysis reported in this paper.

TABLE 3
Direction of Hypothesized Association Between
Relationship Dimensions and Performance

Variables Performance

Dimensions of relationship:
Formalization ?
Standardization +
Reciprocity +
Intensity-contact +
-resource +
Conflict

? No direction hypothesized.

ses are explained as follows. The question of the geographic and cultural
distance of manufacturer and overseas distributor in exporting was mentioned
earlier. Distance is not examined separately in this study because all relation-
ships were between the same two countries.2 However, if this distance is to be
overcome and success achieved, it follows that some method for developing

Journal of International Business Studies, Fall 1982 63

 "closeness" needs to be encouraged. Decision-making closeness (or reciprocity)
and contact closeness (contact intensity) are viewed as means to reduce dis-
tance. In view of this argument, reciprocity and contact intensity are hypothe-
sized as positively associated with performance.
The ownership separation between manufacturer and distributor also needs to
be bridged, if a successful relationship is to result. One way to reduce the effects
of this separation is through programs of support offered by both dyad members:
for example, provision of support materials, level of stockholding. Thus, suppor-
tiveness (or resource intensity) is considered to enable high performance, and
thus resource intensity and performance are held to be positively associated.
Research studies of domestic marketing channels [Brown and Frazier 1978;
Lusch 1975; Pearson and Monoky 1976] indicate that channel performance is
harmed by high levels of intrachannel conflict. By extending these findings to the
export channel studied here, conflict and performance in M-Ddyads are hypothe-
sized to be negatively associated. Finally, standardization is viewed as having a
positive association with performance. Where the M-Drelationship is not stan-
dardized-that is, responsibilities shift around within the dyad and/or business
processes are in a state of flux-high performance is considered unlikely.
The hypothesized association between each of the three participant variables
and the five relationship dimensions is shown in Table 4. Taking the participant
variable, stake, first, one can argue that when one party has much at stake in an
M-Drelationship, it will attempt to protect its investment. Protection includes: a
more explicit agreement concerning the nature of the relationship (formalization);
greater adherence to agreed-upon roles and routines (standardization);more con-
tact and resource exchange (intensity); and a reduction in tension and disagree-
ment (conflict).Now, recallingthe earliersuggested link between stake, dependence,
and power: the greater one party's stake in the relationship, the more dominated
(or less reciprocal) decision making is expected to be.
Experience is viewed as impacting on M-D relationships in varying ways; thus,
experience is regarded as bringing with it recognition that legal distributor agree-
ments do not prevent dyadic problems. In view of this, formalization is consid-
ered reduced when experience is greater. In addition, conflict is expected to be
less frequent because the corporations involved have more knowledge of this
trading method and/or the key contact individuals have been dealing with each
other for longer periods. The same consequences of experience-that is, knowl-
edge and familiarity-are viewed as leading to more joint decision making (reci-
procity). As far as standardization is concerned, it is anticipated that experience
brings with it fairly strong ideas of roles and routines in international business,
and that as a result the established ways would be adhered to more than in dyads

TABLE 4
Direction of Hypothesized Association Between
Participant Variables and Relationship Dimensions
Variables Stake Experience Uncertainty

Dimensions of relationship:
Formalization + -
Standardization + +
Reciprocity - + +
Intensity-contact + ? +
-resource + ? +
Conflict - +

? No directionhypothesized.

64 Journal of International Business Studies, Fall 1982

with less experience. Finally, the direction of association between experience and
intensity is uncertain. On the one hand it can be argued that experience should
bring an appreciation of the benefits of intense relations; on the other hand, more
experience-especially within the established relationship-might be viewed as
reducing the real need for frequent and high level contact and resource exchange.
In terms of the final participant variable considered, the following hypotheses
were established-the greater the uncertainty facing the exporter and distributor:
the less the formalization and standardization, and the more the reciprocity, in-
tensity, and conflict. The hypotheses here flow directly from the preceding dis-
cussion of the literature because researchers from varying backgrounds have
found that intra- and inter-organizational responses to uncertainty involve
organic, fluid, interactive structures and processes. [Starbuck 1976] Four of the
five hypothesized variable associations are explained by these findings. Finally,
in view of the results of Hirsch [1972]and Ford [1978],conflict is considered to be
greater, the more the uncertainty faced by the two parties involved.The testing of
these hypotheses follows a description of the study methods.

The data upon which the study is based were collected through personal interviews STUDY
in 42 companies. The firms in question comprised 21 matched dyads, that is, 21 METHODOLOGY
Canadian manufacturers and their 21 UKdistributors. Interviews were conducted
with the person in each organization responsible for transactions with the other.
The sample was generated initially from manufacturers in the Canadian TradeIn-
dex (1978)who were listed as having a UKrepresentative or representatives around
the world. Furthersampling criteria were as follows: the firms should have 25 or
more employees, because it was felt that few smaller-sized firms would be regu-
larly involved in exporting;firms should process or manufacture products destined
for intermediate markets, as it has been argued that close and cooperative rela-
tionships are more necessary with intermediate rather than consumer goods-
also the intermediate goods emphasis is consistent with Canada's international
trade priorities; and finally, the companies should be located in Ontario so as to
minimize field work costs.
Through applying these criteria, 105 companies were listed as potential sample
members. Initial contacts with manufacturers reduced the list substantially be-
cause many companies were not exporting to the UKor were not using a distribu-
tor in that market. Usable data were collected from 21 manufacturers in May 1978.
Tape recordings were taken of each interviewand questionnaires were completed
during each session. The 21 UKdistributors of the Canadian companies were in-
terviewed in August 1978. Interviewingand data collection were the same as those
undertaken in Canada.
The transcribed tape recordings of each interview proved to be a much more com-
plete source of information than the completed questionnaires and formed the
basis for the coding of responses. The unit of analysis in this study is the rela-
tionship, and in order to reflect both manufacturer's and overseas distributor's
views and experience, the majority of measures used here result from summing
manufacturer and distributor responses.3 The exceptions are the stake measures
and two of the resource intensity measures.
Before considering the study findings, the composition of the final sample is
briefly noted. The 42 companies varied considerably as to size (from less than $1
million to $141 million sales) and international trading experience (from 1 to 50
years). In addition, the 21 dyads in question transacted a variety of intermediate
products-from tanned leather to electronic equipment- at different levels of
annual UK sales (from U.S. $5 thousand to $1.3 million).

Journal of International Business Studies, Fall 1982 65

 FINDINGS Study findings on the association of relationship dimensions and performance
Export are presented in Table 5. In general, a good measure of support was found for the
Performance and study hypotheses. Similar findings for the two performance measures make for a
M-DRelations
straightforward discussion.
The strongest results are those for intensity, which with one exception, is seen to
be positively correlated with export performance. The contact intensity results af-
firm the importance of closeness in reducing the distance between manufacturer
and distributor in leading to enhanced performance. Supportiveness or resource
intensity was hypothesized and found to be an enabling factor in relation to per-
formance. Overall, six of these twelve intensity coefficients proved to be statis-
tically significant.
After intensity, the next strongest results are those for standardization and conflict.
As far as standardization goes, the direction of these results was the opposite of
that hypothesized. Apparently, dyads with the best performance records are those
where roles and routines have been adapted over time. This is interesting, for the
hypothesis was based on the notion that dyads would perform better if roles and
routines were firmly understood and relatively unchanging. The results emphasize
the importance of adaptability.
The findings for conflict provided no surprises. As hypothesized, dyads performed
at a higher level when conflict was less frequent. In addition, the findings for
reciprocity were positive as anticipated although neither coefficient proved to be
statistically significant. Finally, on the question of formalization-where no di-
rectional association was hypothesized-it was found that relations tended to be
more formalized in high performance relationships. Again, however, neither coef-

TABLE 5
Correlation of Relationship Dimensions
and Performance (n = 21)

Variables Performance

UKsales trend UKsales

(+ growth) level

Dimensions of relationship:
Formalization(a)
agreement formality (formal +) .235 .120
Standardization
stability of roles and routines (stable +) -.252 -.313*
Reciprocity
decision making in the dyad (reciprocal +) .144 .183
Intensity-contact
no. of letters .681 * .472**
no. of visits .303 .226
other contact frequency .295 .263
-resource
support materials .032 .151
stock carried .350* .629***
effort expended .401* .183
Conflict
conflict frequency -.475** -.188

(a) coefficients subjected to two-tailed testing, all others one-tailed.

***p<.01.
** p<.05.
* p<.10.

66 Journal of International Business Studies, Fall 1982

ficient was statistically significant. In summary, high performance M-Ddyads were
found to exhibit the following characteristics: more formalization, less standard-
ization, more reciprocity, more contact and resource intensity, and less conflict.

Next, attention turns to the results concerning the second issue addressed. Here Stake and
the discussion centers on the association between three participant variables M-DRelations
and the nature of the M-Drelationship. The results are set out in Table 6. Viewing
the stake findings first, one notices that relatively few significant coefficients
resulted. Despite this, some interesting phenomena are suggese d by the data.
The strongest results are again those for intensity. Here, there is some evidence
that intensity and stake are positively associated, as was hypothesized, although
some of the coefficents are small and/or negative.
A link between stake, dependence, and power potential was alluded to earlier.
The results for stake and reciprocity provide some confirming evidence. Bearing
in mind that decision making provides an appropriate arena for the exercise of
power, one would not expect the negative sign for the reciprocity coefficients.
This suggests that high stake companies may well be dominated because their
dependence confers power on their partner and this power is exercised. As might
be expected, data transformation shows that when the manufacturer is the high
stake party, the distributor's will tends to prevail more, and vice versa. It is partic-
ularly interesting to find that manufacturers tend to be more potent dominators
than distributors. This is probably explained by the fact that overall, manufac-
turers had less at stake in these 21 dyads than did distributors. The mean level of
stake for manufacturers was 6 percent of total sales, whereas that for distribu-
tors was 21 percent. Thus, it would seem that high stake distributors were more
susceptible to influence than their manufacturer counterparts.
These points lead to consideration of the conflict results. Although conflict proved
not to be significantly associated with stake, some intriguing possibilities are ap-
parent. Note that when the distributor is in the high stake position, there is
relatively more conflict than when the manufacturer is the high stake party. Spec-
ulation could link conflict and reciprocity to explain these findings. Thus, the
more frequent conflict when distributors have high stake may be linked to deci-
sion dominance by the manufacturer. This is less the case when the manufac-
turer is in the high stake position, possibly because distributors are less potent
dominators. Finally, the formalization and standardization results present no clear
pattern. Generally then, when stake in the M-Drelationship is high, the following
associated characteristics are found: less reciprocity and more contact and re-
source intensity. Where manufacturers have high stake, less conflict is found;
but when distributors are in the same position, conflict is greater.

Both corporate and personal measures of experience were used and in some Experienceand
cases the pattern of association with the relationship characteristics are similar M-DRelations
whereas in others sharp contrasts are presented. Treating the similarities first,
conflict is found to be less frequent and decision making more joint (reciprocal)
when overall experience is greater. Both of these results were in accordance with
the earlier-stated hypotheses. Some caution is in order here though, because only
one of the coefficients is statistically significant. With these results, however,
similarities end. Since this is the case, a separate discussion of the remaining
results is in order.
When experience is viewed from a personal standpoint, it seems that the greater
the joint experience of the contact persons (or boundary-spanners),the less the
intensity in the M-D relations. Coupled with the findings for formalization and
standardization, a pattern seems to emerge suggesting a certain loosening or

Journal of International Business Studies, Fall 1982 67

C)
00

C-
o

0.
o

(0
(D
TABLE 6
a>
r-t* Correlation of Participant Variables
and Relationship Dimensions (n =21)
3
Sr Stake Experience
co
% of M's % of D's No of Years
a
c) total sales total sales overseas person
C3 Variables through D through M contacts contac
C-
a.
CD Dimensions of relationship:
C0 Formalization
-n agreement formality(formal +) -.114 .207 .077 .483*
0) Standardization
Stability of roles and routines
coE
00
iCD (stable +) -.161 - .000 .043 -.435**
Reciprocity
decision making in the dyad
(reciprocal +) -.114 -.442** .230 .161*
Intensity-contact
No. of letters .526** .374* .095a -.241a
No. of visits .108 .182 .305a -.516**
Other contact frequency -.141 .306 .311a -.470**
- resource
Support materials -.055 -.048 .410*a -.484**
Stock carried .133 .341* .590***a -.111a
Effortexpended .177 .052 -.284a - .244a
Conflict
Conflict frequency - .216 .239 - .076 - .350*

(a)coefficients subjected to two-tailed testing, all others one-tailed.

** p<.01.
*
*
p<.05.
p<.10.
withdrawal from the relationship the longer the key contacts have been dealing
with each other. Not only are relations less intense, they are less formalized and
standardized too. This may well be due to the familiarity of the boundary-
spanners and/or relative stability in the level of transactions between the firms.
Contrasting results are apparent when corporate experience is examined. This
is seen most sharply in connection with' intensity. Greater experience here (as
measured by the number of overseas affiliates) is associated with more intense
relations. These findings regarding contact and resource intensity can be ex-
plained in terms of organizational capabilities. The argument is made that as
companies become more international in their orientation-that is, the number of
overseas affiliates increases-their international activities become better funded.
In this situation, funds are available for contact and resource exchange which
may not be so much the case in companies newer to exporting. Thus, relations may
be more intense because funds have been committed to maintain an established
contact level rather than a need necessarily existing. Aside from the findings re-
garding intensity, weak coefficients are found for formalization and standardiza-
tion and their association with corporate experience.
In summary, contact and resource intensity are greater when there is more corpo-
rate experience. When personal experience is greater, the associated M-Drelation-
ship characteristics tend to be less formalized, less standardized, less contact
and resource intense, and less conflicting. In some instances these findings lend
support to the stated hypotheses, but in other cases this is not so.

A largely consistent set of findings is seen when the participant variable "uncer- Uncertainty and
tainty" is viewed. The single strongest finding is that, as hypothesized, conflict is M-DRelations
greater in these dyads. Both coefficients are highly significant (p<.01). Patterned
and statistically significant results are found for standardization and reciprocity
although in both cases the direction of association was contrary to that envis-
aged. Thus, standardization was positively and reciprocity negatively associated
with uncertainity. These are interesting findings given that the literature points to
looser, more adaptive and open structures and procedures as being the most ap-
propriate organizational response to uncertainty. (Because these M-Ddyads did
not exhibit the "most appropriate"relational characteristics to cope successfully
with uncertainty,it should come as no surprise to find that separate analysis shows
a negative and significant correlation between uncertainty and performance.
The remaining results were somewhat mixed. By and large, when uncertainty was
greater, less resource intensity was found-a result which again ran counter to
that hypothesized. When contact intensity is considered, visits are apparently
more frequent, but other forms of contact less so. Finally, the results for formal-
ization point more toward uncertainty being coupled with more legal-type distrib-
utor agreements. Once again, this result was not anticipated.
In summary, high uncertainty on the part of the dyad is associated with: more for-
malization, more standardization, less reciprocity, less resource intensity, and
more conflict. These findings are now discussed, along with those already
presented.

Numerous factors-controllable and uncontrollable-affect the success of any DISCUSSION

manufacturer in foreign markets, but Hirsch [1971] argues that marketing policies
determine the level of export performance more than various other controllable
factors. When the exporter uses an overseas distributor in the foreign market, the
role of the distributoris clearly crucial because the manufacturer'smarketing pol-
icy is made operational mostly by his foreign partner.Furthermore,in some cases
the overseas distributor may help in the generation of policy by the provision of

Journal of International Business Studies, Fall 1982 69

 timely information and advice: for example, buying trends, competitor profiles. In
this context, manufacturer-overseas distributor relations were investigated and
certain tentative findings emerge.

Export The study findings suggest quite strongly that high performance is associated
Performance and with certain M-D-relationshipcharacteristics. The most successful M-Ddyads ap-
M-DRelations pear to be those where the two parties are prepared to adapt their roles and rou-
tines (are non-standardized)and display a commitment to developing business in
the market in question (contact and resource intensity). The findings regarding
adaptation and commitment are consistent with other export researchers'
results. [For example: Cunningham and Spigel 1971; Keegan 1969] These suc-
cessful dyads also tended to share decision making (were more reciprocal) and,
not surprisingly, exhibited lower levels of intercompany tension and disagree-
ment (conflict). The reciprocity and conflict results are consistent with those
found in various domestic marketing channel field studies. [See for example:
Hunt and Nevin 1974; Pearson and Monoky1976] The final relationship dimension
studied- formalization-presented no clear picture. In this connection, it is in-
teresting to note that while most exporting writers place great emphasis on es-
tablishing formal distributor agreements [MacDonald 1959; Deschampsneufs
1967; Bickers 1971], the majorityof executives interviewed saw little real value in
such a document. Perhaps the finding for formalization is consistent with those
of the four other relationship dimensions, for taken together, the results suggest
that the interaction process between manufacturer and overseas distributor is
more closely linked to success than to the initial structuring of the relationship.
Given that certain relational factors are associated with high performance, it is
important to review the factors that shape such interfirmrelations.

Participant Firm A large number of findings were presented earlier concerning the association of
Factors and the stake of the companies in the relationship, their experience, and their uncer-
M-DRelations tainty surroundingthe relationship, as well as characteristics of the M-Drelation-
ship itself. Rather than attempt to discuss all of these findings, certain striking
results are emphasized.
The most interesting finding regarding stake is that when manufacturers have
the potential to dominate the dyad (because the distributor is highly dependent
on the business transacted), decision making does appear to be dominated by
the manufacturer. Perhaps the manufacturer sees gains from such influence, but
these could be short-term gains at best for high-performance dyads were found
earlier to be those exhibiting more joint decision making (or reciprocal relations).
The most pointed results for experience concern the length of time the boundary-
spanning contacts have dealt with each other. A certain loosening of relations
over time was pointed to earlier. However, a lower level of contact and resource
exchange could be a concern because high performance was found to be asso-
ciated with more, rather than less, intense relations. It is clear that once intensity
is reduced, new opportunities may be overlooked as companies become more re-
mote from each other. Thus, while the loosening might be an expected feature of
more mature and static relationships, it may close off growth opportunities.
A number of the uncertainty findings were surprising. Dyads facing high uncer-
tainty were found to adhere more to established roles and routines, exhibit less
joint decision making, and suffer from more frequent conflict. Each of these re-
sults is at variance with those for high performance relationships. Scope exists
here for attempts to reduce standardization and to make decision making more
joint. On the question of conflict, however, more frequent tension and disagree-
ment may be a cross that high uncertainty relationships have to bear. Perhaps

70 Journal of International Business Studies, Fall 1982

the frequency of conflict can be reduced, but the very uncertainty these dyads
face may well place a greater strain upon their relationships.
The results provide insight to managers involved in M-D relationships. Although
causality has not been tested in this study, the research findings suggest that
certain relationship characteristics are associated with high performance. Cer-
tain relational factors set the tone of the association and require thought and
concerted effort if success is to be achieved. Finally, however, it has to be noted
that the exact nature of the M-D relationship is beyond the bounds of control by
any single firm. The kind of relationship that exists between manufacturer and
overseas distributor is a function of the individual characteristics of the firms
themselves as well as the way they jointly participate in the relationship. In this
connection, three participant variables were shown to be associated with the na-
ture of the M-D relationship observed. in certain instances this influence was
seen, from a performance point of view, to bring relational characteristics of an
undesirable kind. Again, attention to these matters is essential. It is hoped that
fresh light has been shed on the important export manufacturer-overseas distrib-
utor international business method by this research.

1. The "reward"and "coercion" bases of power [French and Raven 1959] are relevant here. FOOTNOTES
2. However, it is not suggested that the country of the companies or the individuals in-
volved are the sole determinant of distance. For discussions of the effect of different ap-
parent levels of distance, see: Abdel-Malek [1974];Hakanson and Wootz [1975];Hallen and
Wiedersheim-Paul [1979].
3 In this connection, it is interesting to note that many domestic marketing channel re-
searchers purportto study channel relations, yet collect data only from one party in the
buyer-seller relationships examined.

Abdel-Malek,T. Managerial Export-Orientation:A Canadian Study. London, Ont.: School of REFERENCES

Business Administration,Universityof Western Ontario, 1974.
Aldrich, H. E. "An InterorganizationalDependency Perspective on Relations Between the
Employment Service and its Organization Set." In The Management of Organization De-
sign, edited by R. H. Kilman,L. R. Pondy, and D. P. Slevin, vol. il. New York:North Holland,
1976, pp. 231-266.
Bickers, R. L. T. Export Marketingin Europe. London:Gower Press, 1971.
Brandt,W. K., and Hulbert,J. M. "Communications and Control in the Multinational Enter-
prise." In MultinationalProduct Management, edited by W. J. Keegan and C. S. Mayer. Pro-
ceedings Series. Chicago: American MarketingAssociation, 1977, pp. 119-146.
Brown,J. R., and Frazier,G. L. "TheApplication of Channel Power: Its Effects and Connota-
tions." In Research Frontiers in Marketing:Dialogues and Directions, edited by S. C. Jain.
Educators' Proceedings. Chicago: American MarketingAssociation, 1978, pp. 266-270.
Business International. Improving Foreign Distributor Performance. Management Mono-
graphs, No. 22. New York:Business International.no date.
.Improving Foreign Distributor Performance. Management Monographs, No. 44.
Business International,1970.
Canadian Trade Index. Toronto:Canadian Manufacturers'Association, 1978.
Cateora, P. R., and Hess, J. M. InternationalMarketing.Homewood, IL:Irwin,1975.
Cunningham, M. T., and Spigel, R. I. "A Study in Successful Exporting."British Journal of
Marketing.Spring 1971, pp. 2-12.
Deschampsneufs, H. MarketingOverseas. Oxford:Pergamon Press, 1967.
Duguid, A., and Jacques, E. Case Studies in Export Organization. London: Her Majesty's
Stationery Office, 1971.
Emerson, R. M. "Power-Dependence Relations." American Sociological Review, February
1962, pp. 31-41.
Etgar, M. "Channel Environmentand Channel Leadership."Journal of MarketingResearch,
February1977, pp. 69-76.
Ford, I. D. "Stability Factors in Industrial Marketing Channels." Industrial Marketing
Management 7 (1978), pp. 410-427.
_ "The Development of Buyer-Seller Relationships in Industrial Markets."Euro-
pean Journal of Marketing14 (1980), pp. 339-353.

Journal of International Business Studies, Fall 1982 71

 , and Rosson, P. J. "The Relationships Between Manufacturers and their Over-
seas Distributors."In Export Management, edited by M. Czinkota and G. Tesar. New York:
Praeger, 1982.
French, J. R. P., and Raven, B. "The Bases of Social Power." In Studies in Social Power,
edited by D. Cartwright.Ann Arbor,MI:Universityof Michigan Press, 1959, pp. 150-167.
Hakanson, H., and Wootz, B. "Supplier Selection in an International Environment:An Ex-
perimental Study." Journal of MarketingResearch, February1975, pp. 46-51.
Hallen, L., and Wiedersheim-Paul, F. "Psychic Distance and Buyer-Seller Interaction." Or-
ganization Marknadoch Samhalle 16 (1979), pp. 308-324.
Hirsch, P. M. "Processing Fads and Fashions: An Organization-SetAnalysis of Cultural In-
dustry Systems." American Journal of Sociology, January 1972, pp. 639-659.
Hirsch, S. The Export Performance of Six ManufacturingIndustries: A Comparative Study
of Denmark,Holland, and Israel. New York:Praeger, 1971.
Hunt, S. D., and Nevin, J. R. "Power in a Channel of Distribution: Sources and Conse-
quences." Journal of MarketingResearch, May 1974, pp. 186-193.
Johansson, J., and Wiedersheim-Paul,F. "The Internationalizationof the Firm:Four Swed-
ish Cases." Journal of Management Studies, October 1975, pp. 305-322.
Keegan, W. J. "MultinationalProduct Planning: Strategic Alternatives."Journal of Market-
ing, January 1969, pp. 58-62.
Lusch, R. F. "An Empirical Investigation of Power, Conflict and Satisfaction in a Franchi-
sor-Franchisee Channel of Distribution." Unpublished Ph.D. dissertation, University of
Wisconsin-Madison, 1975.
Marrett, C. B. "On the Specification of Interorganizational Dimensions." Sociology and
Social Research, October 1971, pp. 83-99.
McDonald, P. Practical Exportingand Importing.New York:Ronald Press, 1959.
Pearson, M. M., and Monoky,J. F. "The Role of Conflict and Cooperation in Channel Per-
formance." In Marketing:1776-1976 and Beyond, edited by K. L. Berhardt. Educators' Pro-
ceedings. Chicago: American MarketingAssociation, pp. 240-244.
Reve, T. "InterorganizationalRelations in Distribution Channels." Proceedings Eighth An-
nual Albert Haring Symposium on Doctoral Research in Marketing,30 March-1 April 1978,
Indiana University,Graduate School of Business, pp. 31-55.
Schmidt, S. M., and Kochan, T. A. "InterorganizationalRelationships: Patterns and Motiva-
tions." AdministrativeScience Quarterly,June 1977, pp. 220-234.
Starbuck, W. H. "Organizationsand Their Environments."In Handbook of Industrialand Or-
ganizational Psychology, edited by M. Dunnette.Chicago: Rand McNally,1976, pp. 1069-1123.
Stern, L. W., and Reve, T. "DistributionChannels as Political Economies: A Frameworkfor
ComparativeAnalysis." Journal of Marketing,Summer 1980, pp. 52-64.
Terpstra, V. InternationalMarketing.New York:Holt, Rinehardand Winston, 1972.
Tookey, D. A. Export MarketingDecisions. Harmondsworth,Middx,UK:Penguin, 1975.
Van de Ven, A. H. "On the Nature, Formation, and Maintenance of Relations Among Or-
ganizations." Academy of Management Review, 1, October 1976, pp. 24-36.
Williamson, O. E. Markets and Hierarchies:Analysis and Antitrust Implications. New York:
Free Press, 1975.

72 Journal of International Business Studies, Fall 1982

View publication stats