manufacturer-overseas distributor relations and export performance

MANUFACTURER-OVERSEAS DISTRIBUTOR RELATIONS AND EXPORT PERFORMANCE

PHILIP J. ROSSON* Dalhousie University I. DAVID FORD** University of Bath

Abstract. The export arrangement which makes use of overseas distributors is examined in this article. Although this method is important for many manufacturers operating in foreign markets there are reservations about the performance levels that are achieved under such arrangements. It is suggested that there is an important link between the performance level achieved and the very nature of the relationship that exists between the manufacturer and overseas distributor. The authors assert also that the nature of the manufacturer-overseas distributor relationship is associated with certain characteristics of the participating companies; namely, their stake in the relationship, their experience, and their uncertainty surrounding the relationship. These propositions are tested and largely corroborated through analysis of data collected from 41 companies in Canada and the UK.

M* Overseas distributors are an important fact of life for many manufacturers involved in international business, and it has been claimed that "the majority of

export sales in the free world today are conducted through independent distributors." [Business International no date, p. 1] Furthermore, this exporting method is

particularly important to smaller companies and those relatively new to overseas trading for these firms seldom have the necessary scale of operations, financial resources, experience, or confidence to operate more directly in foreign markets.

[Duguid and Jacques 1971; Tookey 1975] In view of this importance, it is surprising to find that so little empirical research has been conducted into this exporting method. This article reports findings from a study which examined the nature of the relationships that exist between manufacturers and their distributors in ex-

port marketing channels.

The manufacturer-overseas distributor (M-D) arrangement-like other market en-

try and operating modes-has certain associated benefits and costs for the com-

pany that wants to sell in a particular foreign market. The main benefit is that

relatively inexpensive and immediate representation is gained through the use of an overseas distributor. Against this benefit, however, has to be set the cost that results from reduced control over the foreign marketing operations when com-

pared with exporting through wholly owned sales subsidiaries. Control is reduced because the exporter has no permanent presence in the overseas market, save that provided by the distributor. The distributor is a company that is independent of the manufacturer, and the goals and interests of independent companies seldom mesh exactly. For this reason, the way in which certain marketing activities are performed by the distributor-for example, sales coverage, product servicing, providing market information-may fall short of the exporter's expectations. The

exporter will still be anxious to ensure that sales and profits will grow as planned. The exporter's dilemma then is, that although high performance in the foreign market is desired, the lack of absolute control over marketing means that the ex-

porter is partially dependent on another company to achieve its aims.

INTRODUCTION

THE MANUFACTURER- OVERSEAS DISTRIBUTOR EXPORTING ARRANGEMENT

*Philip J. Rosson is an Associate Professor of Marketing in the School of Business Admin- istration, Dalhousie University, Halifax, Canada. **I. David Ford is a Lecturer in the School of Management, University of Bath, England.

Journal of International Business Studies, Fall 1982 57

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The distributor also plays an active role in the trading relationship. Because they usually represent more than one manufacturer, overseas distributors develop a notion of what is expected of them; and in turn, what they should expect of manufacturers. These expectations increase the delicacy of the exporters' task in achieving high performance from their overseas distributors. The companies' ideas of organizational rights and obligations and the attempts by each party to influence the other play a part in fashioning the transactions between exporter and overseas distributor. The M-D relationship begins when the two firms see mutual benefit from the ex- ploitation of a business opportunity, but the possibility of tension and conflict exists as each independent party bargains in an effort to meet its own goals. The most accurate conceptualization of interorganizational relations of this kind is that they display "mixed-motives." [Schmidt and Kochan 1977, p. 221] That is to say, relations can be at the same time cooperative and conflicting. In turn, this suggests that power and conflict deserve attention from the researcher in this field. Thus, one can see that the exchange process between manufacturer and overseas distributor is a dynamic and political one because two active, independent, and goal-directed firms are involved. While these points are intriguing, they are not distinctively international for the exchange process described so far could just as well characterize M-D relationships in domestic channels as those in exporting channels. The distinctiveness of M-D relations in exporting channels follows from the "distance" which exists between the two interdependent companies. This "distance" is defined as the sum of factors preventing flows of information and understanding between seller and buyer and includes geographic, cultural, and social elements. [Hallen and Wiedersheim-Paul 1979; Johansson and Wiedersheim-Paul 1975] The importance of distance is indicated by Abdel-Malek [1974], whose findings showed that Cana- dian export manufacturers regarded overseas channel intermediaries as less easy to communicate with, less prompt, less aggressive, less dependable, and less competent than Canadian intermediaries. The problem of distance is more severe in M-D relationships when compared with the situation of a multinational producer dealing with an overseas subsidiary. [See Brandt and Hulbert 1979] This severity stems first from the fact that the two companies are rather loosely connected. Such independence makes controls less easily established than in, say, a joint-venture operation. Yet without contact, the problems of distance are likely to persist and to impede high performance. A second reason explaining the potential severity of distance in M-D relations results from the fact that many manufacturers use this method early in their international business operations. When this is so, the manufacturer has little or no prior experience to draw upon. Additionally, it is important to distinguish between "establishment" and "maintenance" functions in M-D relationships. The nature of a relationship is likely to be a product of both the characteristics the companies brought to the relationship initially, as well as those characteristics that result from interaction within the relationship. Consider, for example, how prior international trading experience might shape a relationship at the outset and how the history of intercompany dealings will likely change the initial structuring of the relations.

THE CONCEPTUAL These ideas on the nature of the dealings between manufacturers and their over- MODEL seas distributors lead to the development of a conceptual model of M-D relation-

ships. These relationships, shown in Figure 1, form part of a more general model of the development of buyer-seller relationships, which has been published elsewhere. [Ford and Rosson 1981] The model presented here has three components: partici-

58 Journal of International Business Studies, Fall 1982

FIGURE 1

The Conceptual Model of Manufacturer-Overseas Distributor Relations and Export Performance

Participant Relationship Variables Dimensions Outcomes

Stake > -->- Performance Formalization Standardization

Experience > Reciprocity Intensity Conflict

Uncertainty >

pant variables, relationship dimensions, and the single outcome component- performance.

Three participant variables are discussed: Stake, Experience, and Uncertainty. Participant "Stake" is a measure of the importance of the relationship to each party; that is, Variables it indicates what each company has already invested and what would be lost if the relationship failed. To the extent that this indicates a company's dependence on its partner, stake is a partial measure of the other company's power1 over it. [Emerson 1962] The argument made here, then, is that a link exists between stake, dependence, and the potential for the exercise of power. That the stake of manufacturer and overseas distributor affects their relations is suggested by a number of writers. Terpstra [1972] notes that the interests of the two parties may not always coincide, especially if the exporter's products represent only a small proportion of the distributor's total business-that is, where, the distributor has low stake in the association. Further, a Business International survey found some M-D relationships were "of the most tenuous and lackadaisical sort, while others-where there is a substantial and profitable business relationship-are very close indeed." [1970, p.3] The second participant variable is that of "experience." The relationship between the two companies is seen as being affected by the experience both of the organizations and of individual boundary-spanning managers. For example, manufacturers that have sizable overseas distributor networks might standardize their procedures for dealing with distributors because experience has shown that a particular approach is most satisfactory. This practice may contrast with that of a less experienced company that bargains terms with each distributor individually. Personal experience within the M-D relationship is also likely to shape channel relations through the familiarity and trust that result from repeated business (and social) interaction, as well as personal conflicts that can arise from personality or cultural differences. [Ford 1980; Van de Ven 1976] The position occupied by the key contacts in the exporting and distributor firms is a critical one for each stands between his own organization and the representative of its dyadic partner. In view of this fact, it is likely that the mutual experience of these boundary- spanners will shape the interfirm relationship itself. The final participant variable considered is "uncertainty." Writings in a number of fields support its consideration. Hirsch [1972] found that demand uncertainty was a major factor explaining both the structure and processes of interorganizational relations in the book, film, and record industries. Marketing channel research points to similar conclusions. For example, Etgar [1977] found that channel leaders tend to emerge when channels face threatening environments-


TABLE 1

Variable Definition and Operationalization

1. Participant variables Stake

Definition -What a party (or the parties) stands to lose if the relationship is terminated. Measures -% of M's total sales - UK sales x

through D* Total sales % of D's total sales - M's sales x through M* Total sales

Experience Definition Measures

-Knowledge based upon past and current corporate and personal observations and contacts. -a) corporate

no. of overseas contracts

b) personal years of personal contact

Uncertainty Definition Measure

2. Relationship dimensic Formalization:

Definition Measure

-the number of overseas agents and distributors, and manufacturers that M and D deal with, respectively

-the number of years that the key contact individuals have been dealing with each other

-The extent to which business processes and outcomes are unpredictable. -industry change -5-point scale, range (1) very stable, to (5) very unstable-average score com-

puted over seven items-for example, buying patterns, pricing practices, competitors' strategies, technical developments

-future plans -the extent to which the manufacturer and distributor plan closer (more mutual), continued, or less involved (less mutual) relations. 4-point scale, range -for manufacturer (1) work closer with distributor, to (4) license production in UK-for distributor (1) work closer with manufacturer, to (4) replace manufacturer

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-The extent to which the terms of the relationship are agreed upon and made explicit. -agreement formality -3-point scale, range (1) verbal agreement, to (3) legal agreement

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Standardization: Definition Measure

Reciprocity: Definition

Measure

Intensity: Definition Measures

-The extent to which the established roles and trading routines are adhered to. -stability of roles and routines -3-point scale, range (1) fixed, to (3) changing

-The extent to which the manufacturer and distributor are both involved in decision making, despite the traditional domains of each party.

-decision making in the dyad -5-point scale, range (1) made by distributor, to (5) made by manufacturer, for 10 decision items. Average score computed for each dyad, those close to sample average regarded as displaying relatively reciprocal decision making. Dyads with extreme scores regarded as less reciprocal

-The level of contact and resource exchange between the parties. -a) contact intensity

no. of letters -number of letters exchanged by manufacturer and distributor annually no. of visits -the number of visits made to each other by manufacturer and distributor

other contact frequency

-b) resource intensity support materials* stock carried* effort expended

Conflict: Definition Measure

3. Outcomes Performance:

Definition Measures

biannually -the frequency with which the contact individuals interact with persons in

the manufacturer/distributor firm, other than the primary contact

-the sum of separate types of support material provided by the manufacturer -the value of stock of the manufacturer's products carried by the UK distributor -5-point scale, range (1) much less, to (5) much more effort expended on the

relationship compared to others engaged in

-The perceived level of tension and disagreement between the two parties. -conflict frequency -6-point scale, range (1) never, to (6) very often

-The accomplishments-real and perceived, that have resulted from the manufacturer-distributor relationship. -UK sales trend -5-point scale, range (1) declining sharply, to (5) growing sharply over last 3

years -UK sales level -the current annual level of sales of the manufacturer's products in the UK

*For these measures, the unit of analysis is either the manufacturer or the distributor. All other measures were summed to reflect manufacturer and distributor views and experiences.

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one component of which was demand uncertainty. Ford's [1978] comparative study of two distribution channels showed that the more recently formed and growing (more uncertain) channel system displayed less well developed norms of behavior and more exercise of power than the system that faced a more certain environment. In the field of institutional economics, Williamson [1975] argues that when uncertainty is experienced under market exchange-the M-D arrangement, for example-disequilibrium and inefficiency result because this exchange method lacks a directing force. A further aspect of uncertainty, which is important in the M-D case, is that which may be generated by differences between the companies in their views of the importance of the relationship, its current position, and their plans for its future. The closeness of the two companies' plans for the future of the relationship is regarded as a measure of their "mutuality" and is referred to later.

Relationship Aside from "conflict," the relationship dimensions used are those identified by Dimensions Marrett [1971] in her review of studies of relations between public agencies. The

decision to adopt these dimensions was based upon several factors. First, a number of researchers have successfully embraced these dimensions in recent empirical studies of interorganizational relations. [Aldrich 1976; Schmidt and Kochan 1977] Second, Reve [1978] has proposed a very similar set of dimensions to describe relations among members of marketing channels. Third, preliminary field work suggested that Marrett's dimensions were valid descriptors of the M-D relations under study. In view of these points, the four dimensions-formalization, standardization, reciprocity, and intensity-were adopted. The inclusion of conflict as a relationship dimension followed from the view expressed earlier- that M-D dyads exhibit mixed motives. This, in turn implies that tension and disagreement may be a prevailing condition of such relations. [Stern and Reve 1980, p. 58] Each of these five dimensions is defined and operationalized in Table 1, as are the variables "stake," "experience," "uncertainty," and "performance." The nine variables just described are operationalized through 18 measures shown in Table 1, which were drawn from the larger set shown in Table 2. The selection of these particular measures as "most appropriate," resulted either from inspection of the measure correlation matrix or from factor analysis results. As a result of this discussion, two linked questions were addressed in the research undertaken and reported here. The most important of them is: "what are the characteristics of the relationships between manufacturers and overseas distributors that are associated with high levels of performance?" This is a major issue, since the view widely voiced in the literature is that good performance can be a problem under the M-D exporting arrangement. [See, for example, Bickers 1971; Business International 1970; Cateora and Hess 1975.] A second question follows from the first: "To what extent are the relationships between manufacturers and their overseas distributors shaped by certain characteristics of the two companies and their individual representatives (that is, the participant variables)?" Again, this issue merits attention, for relationships do not simply hap- pen, rather they result from interplay between the parties involved.

RESEARCH These questions are examined by analyzing first the association between the re- HYPOTHESES lationship dimensions and performance, and second the association between

the participant variables and relationship dimensions. The hypothesized association between each of the five relationship dimensions and performance is shown in Table 3. Essentially, high performance is regarded as associated with greater standardization, reciprocity, and intensity, and with lower conflict. An association with formalization is hypothesized, but no direction is stated. The hypothe-


TABLE 2

Full Listing of Variable Measures

Stake Time to replace D/M Importance of DIM % of M's total sales through D* % of D's total sales through M* % of M's export sales through D % of D's import sales through M Importance of the business of M/D

Experience-Corporate Number of overseas contacts* Years of international trading Years of Canada/UK trading Years M-D relationship established Relationship contact level

-Personal Contact age Years of personal contact* Work experience overseas Days traveling overseas Overseas trading experience Schooling Company experience

Uncertainty Profit objectives realized New product activity UK competition R&D expenditures Industry change* Future plans*

Formalization Agreement formality*

Standardization Stability of roles and routines*

Reciprocity Decision making in the dyad* Spot decision-making authority

Intensity-Contact Number of letters* Number of phone calls Number of visits* Number of telex messages Number of company linkages Other contact frequency*

-Resource Support materials* Use of M's logo Stock carried* Training Effort expended*

Conflict Conflict over objectives Conflict frequency* Decision area conflict Conflict description score Comparative conflict in relationship Resolution frequency

Performance UK sales trend* UK sales level* Sales satisfaction Cooperation Overall satisfaction

*Measures used in the analysis reported in this paper.

TABLE 3

Direction of Hypothesized Association Between Relationship Dimensions and Performance

Variables Performance

Dimensions of relationship: Formalization ? Standardization + Reciprocity + Intensity-contact +

-resource + Conflict

? No direction hypothesized.

ses are explained as follows. The question of the geographic and cultural distance of manufacturer and overseas distributor in exporting was mentioned earlier. Distance is not examined separately in this study because all relationships were between the same two countries.2 However, if this distance is to be overcome and success achieved, it follows that some method for developing


"closeness" needs to be encouraged. Decision-making closeness (or reciprocity) and contact closeness (contact intensity) are viewed as means to reduce distance. In view of this argument, reciprocity and contact intensity are hypothesized as positively associated with performance. The ownership separation between manufacturer and distributor also needs to be bridged, if a successful relationship is to result. One way to reduce the effects of this separation is through programs of support offered by both dyad members: for example, provision of support materials, level of stockholding. Thus, supportiveness (or resource intensity) is considered to enable high performance, and thus resource intensity and performance are held to be positively associated. Research studies of domestic marketing channels [Brown and Frazier 1978; Lusch 1975; Pearson and Monoky 1976] indicate that channel performance is harmed by high levels of intrachannel conflict. By extending these findings to the export channel studied here, conflict and performance in M-D dyads are hypothesized to be negatively associated. Finally, standardization is viewed as having a positive association with performance. Where the M-D relationship is not standardized-that is, responsibilities shift around within the dyad and/or business processes are in a state of flux-high performance is considered unlikely. The hypothesized association between each of the three participant variables and the five relationship dimensions is shown in Table 4. Taking the participant variable, stake, first, one can argue that when one party has much at stake in an M-D relationship, it will attempt to protect its investment. Protection includes: a more explicit agreement concerning the nature of the relationship (formalization); greater adherence to agreed-upon roles and routines (standardization); more contact and resource exchange (intensity); and a reduction in tension and disagreement (conflict). Now, recalling the earlier suggested link between stake, dependence, and power: the greater one party's stake in the relationship, the more dominated (or less reciprocal) decision making is expected to be. Experience is viewed as impacting on M-D relationships in varying ways; thus, experience is regarded as bringing with it recognition that legal distributor agreements do not prevent dyadic problems. In view of this, formalization is considered reduced when experience is greater. In addition, conflict is expected to be less frequent because the corporations involved have more knowledge of this trading method and/or the key contact individuals have been dealing with each other for longer periods. The same consequences of experience-that is, knowledge and familiarity-are viewed as leading to more joint decision making (reciprocity). As far as standardization is concerned, it is anticipated that experience brings with it fairly strong ideas of roles and routines in international business, and that as a result the established ways would be adhered to more than in dyads

TABLE 4

Direction of Hypothesized Association Between Participant Variables and Relationship Dimensions

Variables Stake Experience Uncertainty

Dimensions of relationship: Formalization + - Standardization + + Reciprocity - + + Intensity-contact + ? +

-resource + ? + Conflict - +

? No direction hypothesized.


with less experience. Finally, the direction of association between experience and intensity is uncertain. On the one hand it can be argued that experience should bring an appreciation of the benefits of intense relations; on the other hand, more experience-especially within the established relationship-might be viewed as reducing the real need for frequent and high level contact and resource exchange. In terms of the final participant variable considered, the following hypotheses were established-the greater the uncertainty facing the exporter and distributor: the less the formalization and standardization, and the more the reciprocity, intensity, and conflict. The hypotheses here flow directly from the preceding discussion of the literature because researchers from varying backgrounds have found that intra- and inter-organizational responses to uncertainty involve organic, fluid, interactive structures and processes. [Starbuck 1976] Four of the five hypothesized variable associations are explained by these findings. Finally, in view of the results of Hirsch [1972] and Ford [1978], conflict is considered to be greater, the more the uncertainty faced by the two parties involved. The testing of these hypotheses follows a description of the study methods.

The data upon which the study is based were collected through personal interviews in 42 companies. The firms in question comprised 21 matched dyads, that is, 21 Canadian manufacturers and their 21 UK distributors. Interviews were conducted with the person in each organization responsible for transactions with the other. The sample was generated initially from manufacturers in the Canadian Trade In- dex (1978) who were listed as having a UK representative or representatives around the world. Further sampling criteria were as follows: the firms should have 25 or more employees, because it was felt that few smaller-sized firms would be regu- larly involved in exporting; firms should process or manufacture products destined for intermediate markets, as it has been argued that close and cooperative relationships are more necessary with intermediate rather than consumer goods- also the intermediate goods emphasis is consistent with Canada's international trade priorities; and finally, the companies should be located in Ontario so as to minimize field work costs.

Through applying these criteria, 105 companies were listed as potential sample members. Initial contacts with manufacturers reduced the list substantially because many companies were not exporting to the UK or were not using a distributor in that market. Usable data were collected from 21 manufacturers in May 1978. Tape recordings were taken of each interview and questionnaires were completed during each session. The 21 UK distributors of the Canadian companies were interviewed in August 1978. Interviewing and data collection were the same as those undertaken in Canada. The transcribed tape recordings of each interview proved to be a much more com- plete source of information than the completed questionnaires and formed the basis for the coding of responses. The unit of analysis in this study is the relationship, and in order to reflect both manufacturer's and overseas distributor's views and experience, the majority of measures used here result from summing manufacturer and distributor responses.3 The exceptions are the stake measures and two of the resource intensity measures. Before considering the study findings, the composition of the final sample is briefly noted. The 42 companies varied considerably as to size (from less than $1 million to $141 million sales) and international trading experience (from 1 to 50 years). In addition, the 21 dyads in question transacted a variety of intermediate products-from tanned leather to electronic equipment- at different levels of annual UK sales (from U.S. $5 thousand to $1.3 million).

STUDY METHODOLOGY


FINDINGS Export

Performance and M-D Relations

Study findings on the association of relationship dimensions and performance are presented in Table 5. In general, a good measure of support was found for the study hypotheses. Similar findings for the two performance measures make for a straightforward discussion.

The strongest results are those for intensity, which with one exception, is seen to be positively correlated with export performance. The contact intensity results af- firm the importance of closeness in reducing the distance between manufacturer and distributor in leading to enhanced performance. Supportiveness or resource intensity was hypothesized and found to be an enabling factor in relation to performance. Overall, six of these twelve intensity coefficients proved to be statistically significant. After intensity, the next strongest results are those for standardization and conflict. As far as standardization goes, the direction of these results was the opposite of that hypothesized. Apparently, dyads with the best performance records are those where roles and routines have been adapted over time. This is interesting, for the hypothesis was based on the notion that dyads would perform better if roles and routines were firmly understood and relatively unchanging. The results emphasize the importance of adaptability. The findings for conflict provided no surprises. As hypothesized, dyads performed at a higher level when conflict was less frequent. In addition, the findings for reciprocity were positive as anticipated although neither coefficient proved to be statistically significant. Finally, on the question of formalization-where no di- rectional association was hypothesized-it was found that relations tended to be more formalized in high performance relationships. Again, however, neither coef-

TABLE 5

Correlation of Relationship Dimensions and Performance (n = 21)

Variables Performance

UK sales trend UK sales (+ growth) level

Dimensions of relationship: Formalization (a)

agreement formality (formal +) .235 .120 Standardization

stability of roles and routines (stable +) -.252 -.313* Reciprocity

decision making in the dyad (reciprocal +) .144 .183 Intensity-contact

no. of letters .681 * .472** no. of visits .303 .226 other contact frequency .295 .263

-resource support materials .032 .151 stock carried .350* .629*** effort expended .401* .183

Conflict conflict frequency -.475** -.188

(a) coefficients subjected to two-tailed testing, all others one-tailed. ***p<.01. ** p<.05.

* p<.10.


ficient was statistically significant. In summary, high performance M-D dyads were found to exhibit the following characteristics: more formalization, less standardization, more reciprocity, more contact and resource intensity, and less conflict.

Next, attention turns to the results concerning the second issue addressed. Here the discussion centers on the association between three participant variables and the nature of the M-D relationship. The results are set out in Table 6. Viewing the stake findings first, one notices that relatively few significant coefficients resulted. Despite this, some interesting phenomena are suggese d by the data. The strongest results are again those for intensity. Here, there is some evidence that intensity and stake are positively associated, as was hypothesized, although some of the coefficents are small and/or negative. A link between stake, dependence, and power potential was alluded to earlier. The results for stake and reciprocity provide some confirming evidence. Bearing in mind that decision making provides an appropriate arena for the exercise of power, one would not expect the negative sign for the reciprocity coefficients. This suggests that high stake companies may well be dominated because their dependence confers power on their partner and this power is exercised. As might be expected, data transformation shows that when the manufacturer is the high stake party, the distributor's will tends to prevail more, and vice versa. It is particularly interesting to find that manufacturers tend to be more potent dominators than distributors. This is probably explained by the fact that overall, manufacturers had less at stake in these 21 dyads than did distributors. The mean level of stake for manufacturers was 6 percent of total sales, whereas that for distributors was 21 percent. Thus, it would seem that high stake distributors were more susceptible to influence than their manufacturer counterparts. These points lead to consideration of the conflict results. Although conflict proved not to be significantly associated with stake, some intriguing possibilities are apparent. Note that when the distributor is in the high stake position, there is relatively more conflict than when the manufacturer is the high stake party. Spec- ulation could link conflict and reciprocity to explain these findings. Thus, the more frequent conflict when distributors have high stake may be linked to decision dominance by the manufacturer. This is less the case when the manufacturer is in the high stake position, possibly because distributors are less potent dominators. Finally, the formalization and standardization results present no clear pattern. Generally then, when stake in the M-D relationship is high, the following associated characteristics are found: less reciprocity and more contact and resource intensity. Where manufacturers have high stake, less conflict is found; but when distributors are in the same position, conflict is greater.

Both corporate and personal measures of experience were used and in some cases the pattern of association with the relationship characteristics are similar whereas in others sharp contrasts are presented. Treating the similarities first, conflict is found to be less frequent and decision making more joint (reciprocal) when overall experience is greater. Both of these results were in accordance with the earlier-stated hypotheses. Some caution is in order here though, because only one of the coefficients is statistically significant. With these results, however, similarities end. Since this is the case, a separate discussion of the remaining results is in order. When experience is viewed from a personal standpoint, it seems that the greater the joint experience of the contact persons (or boundary-spanners), the less the intensity in the M-D relations. Coupled with the findings for formalization and standardization, a pattern seems to emerge suggesting a certain loosening or

Experience and M-D Relations


Stake and M-D Relations

TABLE 6

Correlation of Participant Variables and Relationship Dimensions (n =21)

Stake Experience Uncertainty

% of M's % of D's No of Years of Future total sales total sales overseas personal Industry plans

Variables through D through M contacts contact change (+ uncertain)

Dimensions of relationship: Formalization

agreement formality (formal +) -.114 .207 .077 .483** .354* -.099 Standardization

Stability of roles and routines (stable +) -.161 - .000 .043 -.435** .567*** .434*

Reciprocity decision making in the dyad (reciprocal +) -.114 -.442** .230 .161** -.400** -.309*

Intensity-contact No. of letters .526** .374* .095a -.241a -.182 -.138 No. of visits .108 .182 .305a -.516**a .510*** .215 Other contact frequency -.141 .306 .311a -.470**a .052 -.163

- resource Support materials -.055 -.048 .410*a -.484**a .278 -.181 Stock carried .133 .341* .590***a -.111a -.159 -.143 Effort expended .177 .052 -.284a - .244a -.452* -.384

Conflict Conflict frequency - .216 .239 - .076 - .350* .509*** .652***

(a) coefficients subjected to two-tailed testing, all others one-tailed. ** p<.01. * p<.05.

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withdrawal from the relationship the longer the key contacts have been dealing with each other. Not only are relations less intense, they are less formalized and standardized too. This may well be due to the familiarity of the boundary- spanners and/or relative stability in the level of transactions between the firms.

Contrasting results are apparent when corporate experience is examined. This is seen most sharply in connection with' intensity. Greater experience here (as measured by the number of overseas affiliates) is associated with more intense relations. These findings regarding contact and resource intensity can be explained in terms of organizational capabilities. The argument is made that as companies become more international in their orientation-that is, the number of overseas affiliates increases-their international activities become better funded. In this situation, funds are available for contact and resource exchange which may not be so much the case in companies newer to exporting. Thus, relations may be more intense because funds have been committed to maintain an established contact level rather than a need necessarily existing. Aside from the findings regarding intensity, weak coefficients are found for formalization and standardization and their association with corporate experience. In summary, contact and resource intensity are greater when there is more corporate experience. When personal experience is greater, the associated M-D relationship characteristics tend to be less formalized, less standardized, less contact and resource intense, and less conflicting. In some instances these findings lend support to the stated hypotheses, but in other cases this is not so.

A largely consistent set of findings is seen when the participant variable "uncer- Uncertainty and tainty" is viewed. The single strongest finding is that, as hypothesized, conflict is M-D Relations greater in these dyads. Both coefficients are highly significant (p<.01). Patterned and statistically significant results are found for standardization and reciprocity although in both cases the direction of association was contrary to that envis- aged. Thus, standardization was positively and reciprocity negatively associated with uncertainity. These are interesting findings given that the literature points to looser, more adaptive and open structures and procedures as being the most appropriate organizational response to uncertainty. (Because these M-D dyads did not exhibit the "most appropriate" relational characteristics to cope successfully with uncertainty, it should come as no surprise to find that separate analysis shows a negative and significant correlation between uncertainty and performance. The remaining results were somewhat mixed. By and large, when uncertainty was greater, less resource intensity was found-a result which again ran counter to that hypothesized. When contact intensity is considered, visits are apparently more frequent, but other forms of contact less so. Finally, the results for formalization point more toward uncertainty being coupled with more legal-type distributor agreements. Once again, this result was not anticipated. In summary, high uncertainty on the part of the dyad is associated with: more formalization, more standardization, less reciprocity, less resource intensity, and more conflict. These findings are now discussed, along with those already presented.

Numerous factors-controllable and uncontrollable-affect the success of any DISCUSSION manufacturer in foreign markets, but Hirsch [1971] argues that marketing policies determine the level of export performance more than various other controllable factors. When the exporter uses an overseas distributor in the foreign market, the role of the distributor is clearly crucial because the manufacturer's marketing policy is made operational mostly by his foreign partner. Furthermore, in some cases the overseas distributor may help in the generation of policy by the provision of


timely information and advice: for example, buying trends, competitor profiles. In this context, manufacturer-overseas distributor relations were investigated and certain tentative findings emerge.

Export Performance and

M-D Relations

Participant Firm Factors and

M-D Relations

The study findings suggest quite strongly that high performance is associated with certain M-D-relationship characteristics. The most successful M-D dyads appear to be those where the two parties are prepared to adapt their roles and routines (are non-standardized) and display a commitment to developing business in the market in question (contact and resource intensity). The findings regarding adaptation and commitment are consistent with other export researchers' results. [For example: Cunningham and Spigel 1971; Keegan 1969] These successful dyads also tended to share decision making (were more reciprocal) and, not surprisingly, exhibited lower levels of intercompany tension and disagreement (conflict). The reciprocity and conflict results are consistent with those found in various domestic marketing channel field studies. [See for example: Hunt and Nevin 1974; Pearson and Monoky 1976] The final relationship dimension studied- formalization-presented no clear picture. In this connection, it is interesting to note that while most exporting writers place great emphasis on es- tablishing formal distributor agreements [MacDonald 1959; Deschampsneufs 1967; Bickers 1971], the majority of executives interviewed saw little real value in such a document. Perhaps the finding for formalization is consistent with those of the four other relationship dimensions, for taken together, the results suggest that the interaction process between manufacturer and overseas distributor is more closely linked to success than to the initial structuring of the relationship. Given that certain relational factors are associated with high performance, it is important to review the factors that shape such interfirm relations.

A large number of findings were presented earlier concerning the association of the stake of the companies in the relationship, their experience, and their uncertainty surrounding the relationship, as well as characteristics of the M-D relationship itself. Rather than attempt to discuss all of these findings, certain striking results are emphasized. The most interesting finding regarding stake is that when manufacturers have the potential to dominate the dyad (because the distributor is highly dependent on the business transacted), decision making does appear to be dominated by the manufacturer. Perhaps the manufacturer sees gains from such influence, but these could be short-term gains at best for high-performance dyads were found earlier to be those exhibiting more joint decision making (or reciprocal relations). The most pointed results for experience concern the length of time the boundary- spanning contacts have dealt with each other. A certain loosening of relations over time was pointed to earlier. However, a lower level of contact and resource exchange could be a concern because high performance was found to be associated with more, rather than less, intense relations. It is clear that once intensity is reduced, new opportunities may be overlooked as companies become more re- mote from each other. Thus, while the loosening might be an expected feature of more mature and static relationships, it may close off growth opportunities. A number of the uncertainty findings were surprising. Dyads facing high uncertainty were found to adhere more to established roles and routines, exhibit less joint decision making, and suffer from more frequent conflict. Each of these results is at variance with those for high performance relationships. Scope exists here for attempts to reduce standardization and to make decision making more joint. On the question of conflict, however, more frequent tension and disagreement may be a cross that high uncertainty relationships have to bear. Perhaps


the frequency of conflict can be reduced, but the very uncertainty these dyads face may well place a greater strain upon their relationships. The results provide insight to managers involved in M-D relationships. Although causality has not been tested in this study, the research findings suggest that certain relationship characteristics are associated with high performance. Cer- tain relational factors set the tone of the association and require thought and concerted effort if success is to be achieved. Finally, however, it has to be noted that the exact nature of the M-D relationship is beyond the bounds of control by any single firm. The kind of relationship that exists between manufacturer and overseas distributor is a function of the individual characteristics of the firms themselves as well as the way they jointly participate in the relationship. In this connection, three participant variables were shown to be associated with the nature of the M-D relationship observed. in certain instances this influence was seen, from a performance point of view, to bring relational characteristics of an undesirable kind. Again, attention to these matters is essential. It is hoped that fresh light has been shed on the important export manufacturer-overseas distributor international business method by this research.

1. The "reward" and "coercion" bases of power [French and Raven 1959] are relevant here. 2. However, it is not suggested that the country of the companies or the individuals involved are the sole determinant of distance. For discussions of the effect of different apparent levels of distance, see: Abdel-Malek [1974]; Hakanson and Wootz [1975]; Hallen and Wiedersheim-Paul [1979]. 3 In this connection, it is interesting to note that many domestic marketing channel researchers purport to study channel relations, yet collect data only from one party in the buyer-seller relationships examined.

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.Improving Foreign Distributor Performance. Management Monographs, No. 44. Business International, 1970. Canadian Trade Index. Toronto: Canadian Manufacturers' Association, 1978. Cateora, P. R., and Hess, J. M. International Marketing. Homewood, IL: Irwin, 1975. Cunningham, M. T., and Spigel, R. I. "A Study in Successful Exporting." British Journal of Marketing. Spring 1971, pp. 2-12. Deschampsneufs, H. Marketing Overseas. Oxford: Pergamon Press, 1967. Duguid, A., and Jacques, E. Case Studies in Export Organization. London: Her Majesty's Stationery Office, 1971. Emerson, R. M. "Power-Dependence Relations." American Sociological Review, February 1962, pp. 31-41. Etgar, M. "Channel Environment and Channel Leadership." Journal of Marketing Research, February 1977, pp. 69-76. Ford, I. D. "Stability Factors in Industrial Marketing Channels." Industrial Marketing Management 7 (1978), pp. 410-427.

_ "The Development of Buyer-Seller Relationships in Industrial Markets."Euro- pean Journal of Marketing 14 (1980), pp. 339-353.

FOOTNOTES

REFERENCES


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