Manufacturers' intention to extend the relationships with distributors

Abstract

PurposeToday, it is becoming increasingly important for manufacturers to develop cooperative relationships with distributors and obtain customized distribution services. Previous research has suggested that, with specified assets, manufacturers might “hold up” distributors and that such a relationship would not be sustainable. In contrast, the purpose of this paper is to develop a causal model to explain why and how manufacturers intend to extend cooperative relationships with distributors.Design/methodology/approachTo propose a causal model, two approaches – relationship marketing and transaction cost analysis – are examined. To complement the defects of the two approaches, a repeated game theoretic approach was applied in the causal model. The proposed model is empirically tested with 144 strategic business units of manufacturers and the structural equation modelling. Also, a case from the US and Japanese automobile industries is proffered to discuss the validity of the model.FindingsThe results of the empirical analysis show that asset specificity by distributors increases manufacturers' long‐term orientation, which increases manufacturers' intention to extend the relationship. It was also found that the intention to extend the relationship is reduced by distributors' opportunism. These findings are supported by a case study of the automobile industry in the USA and Japan.Originality/valueWhile most previous relationship marketing literature has focused on social psychological constructs, the present paper introduces the viewpoints of a game theoretic approach. The paper proposes a causal model regarding the relationship among asset specificity, opportunism, long‐term orientation and intention to extend the relationship, which successfully explains why manufacturers do not hold up distributors with their specified assets.