When does a supplier tolerate resellers’ opportunistic behaviors? Transaction benefit and cost perspectives

Abstract

PurposeThe purpose of this study is to examine tolerance of channel partners’ opportunistic behaviors as a viable governance mechanism and to test contingent transaction benefit and cost factors to determine tolerance of opportunistic behaviors.Design/methodology/approachThrough the theoretical lenses of governance value analysis and transaction cost economics, this study theorizes that a supplier’s tolerance of its reseller’s opportunistic behaviors should depend on transaction benefit factors (e.g. new product creativity and marketing program creativity) and transaction cost factors (e.g. performance ambiguity and opportunity cost). The author empirically tests the moderation model using data from a large-scale survey of 141 mobile phone suppliers in South Korea.FindingsThe empirical results largely support the predictions on the moderating effects. For transaction benefit factors, marketing program creativity increases the supplier’s tolerance, while new product creativity does not increase the supplier’s tolerance. For transaction cost factors, the supplier’s concerns about opportunity cost increase the level of tolerance, while performance ambiguity of a business partner decreases the tolerance level.Research limitations/implicationsTheorizing opportunistic behaviors as a policy variable subject to benefit-cost assessment rather than an assumption provides new insights to interfirm governance research.Originality/valueTo the best of the author’s knowledge, this study is the first kind to consider transaction benefit and cost factors together in a single contingency framework in tolerance research. Also, this research provides a new perspective on a microlevel marketing factor (i.e. creativity) as an influential factor in governance mechanisms.