Attributes of product advantage and choices for manufacturer–retailer formal governance: the case of new product launch

Abstract

PurposeThis study examined how the technological (tech) advantage and market advantage of new products influence the level of formal channel governance and, in turn, affect the success of new products in the presence of relational governance.Design/methodology/approachThe hypotheses are tested using the partial least squares approach to analyse survey data collected from 392 retailers of customer goods in China.FindingsThe results indicate that tech advantage and market advantage lead to an increase in retailers' transaction-specific investments (TSIs) and contract explicitness, respectively; the positive effect of market advantage on a retailer's TSIs will gradually decrease and will even become negative beyond a certain point. The relational governance mechanism can substitute for the effects of contract explicitness on improving new product success.Originality/valueThis research provides a new perspective for understanding new product advantage and exerts an initial effort to empirically distinguish between tech advantage and market advantage. It enriches the innovation literature by examining the governance of new product launches through retailers and explores the effects of formal and informal governance on channel cooperation performance in the new product launch stage.