Channel structure modification: Motivations and switching costs in manufacturer-distributor relationship

Abstract

The creation, maintenance, and evolution of channel relationships between manufacturers and channel partners have long been important issues in the area of channel research. However, the issues of channel partnership dissolution have received very limited attention. The goals of this dissertation are two-fold: first, to develop a comprehensive model of switching costs which includes the possible deterrent effects that these costs may have on the probability of channel relationship modification; second, to identify the motivating factors underlying the modification of channel partner relationships. Relevant past research in the areas of distribution channel theory, social exchange theory, and organizational behavior are reviewed to support the model building effort. Data are collected from distributors and manufacturers in the materials, repair, and operation (MRO) industry. Distributors and Manufacturers are found to behave differently. Overall switching costs and overall satisfaction are found to deter channel switching while comparison level of alternative (CL$\sb{\rm alt}$) and communication influence indirectly through overall satisfaction for distributors. On the other hand, overall satisfaction and comparison level of alternatives (CL$\sb{\rm alt}$) are found to directly deter channel switching while comparison level of alternative (CL$\sb{\rm alt}$) and communication influence indirectly through overall satisfaction for manufacturers. Further, manufacturers are found to try to reduce overall switching costs when their intention to switch is high. Among proposed components of switching costs, a contractual clause which stipulate a justifiable reason to terminate an exchange relation, investment level (for distributor only) and benefits from a current relationship (for manufacturer only) are found to be significantly related to overall switching costs.