Efficiency of governance mechanisms in China's distribution channels

Abstract

As multinational enterprises increasingly enter the Chinese market, channel researchers are paying increasing attention to the efficiency of channel governance mechanisms in this nontraditional market. Yet current research neglects different distributor characteristics, such as risk preferences and long- or short-term orientations. In China, an emerging market with continuously evolving legal institutions, distributors’ core business orientations (risk preference and long-term orientation) may affect their channel relationship with suppliers (distributor trust and channel conflict). The efficiency of hierarchical and relational governance mechanisms also may depend on distributor orientations. Using a national sample of distributors in China, this study confirms that both governance mechanisms exert significant main effects on channel relationships. In addition, the two core distributor orientations moderate the effects of the manufacturer's hierarchical governance mechanisms on relationship quality, though they do not for relational governance mechanisms. The results suggest that multinational enterprises should tailor their governance mechanisms to distributors with different risk and long-term orientations.