Jan B. Heide

Transaction Cost Analysis: Past, Present, and Future Applications

Over the past decade, transaction cost analysis (TCA) has received considerable attention in the marketing literature. Marketing scholars have made important contributions in extending and refining...

Opportunism in Interfirm Relationships: Forms, Outcomes, and Solutions

Much of the recent literature on interfirm relationships has focused on strategies for controlling opportunism. Somewhat surprisingly, little attention has been paid in this literature to the opportunism construct itself. Specifically, prior research has failed to recognize the different types of behavior that are hidden behind the general opportunism label. As a consequence, the knowledge of strategies for managing opportunism remains incomplete. The authors review the original and emergent conceptualizations of opportunism and illustrate them using actual industry cases. The authors also develop a conceptual framework of governance strategies that can be used to manage different forms of opportunism.

Relationship Governance in a Supply Chain Network

The authors examine how a firms strategy in a (downstream) customer relationship is contingent on how a related relationship outside of the focal dyad is organized. Drawing on emerging perspectives on interfirm governance and networks, the authors propose that the ability to show flexibility toward a (downstream) customer under uncertain market conditions depends on the governance mechanisms that have been deployed in an (upstream) supplier relationship. The governance mechanisms take the form of (1) supplier qualification programs and (2) incentive structures based on hostages. The authors develop a set of contingency predictions and test them empirically in the context of vertical supply chain networks in the apparel industry. The tests show good support for the hypotheses. The authors discuss the implications of the findings for marketing theory and practice.

Choice of Supplier in Embedded Markets: Relationship and Marketing Program Effects

Recent research has documented how exchanges between buyers and sellers are frequently embedded in social relationships. An unresolved question, however, is the extent to which such relationships protect incumbent suppliers from new competitors and their marketing programs. The authors develop a conceptual framework of how relationship and marketing variables influence choice of supplier and test the framework empirically in the context of business-to-business services. The results show that interpersonal relationships between buyers and suppliers serve as a switching barrier but are considerably less important than both firm-level switching costs and marketing variables. Moreover, unlike switching costs, interpersonal relationships do not play the frequently mentioned role of a buffer against price and product competition. Finally, the authors show that buyers and suppliers hold systematically different views of the determinants of switching.

Performance implications of buyer-supplier relationships in industrial markets: A transaction cost explanation

Abstract Increasing international competition in a number of industries has required U.S. manufacturers to undertake strategic realignments of various kinds. One of the most noticeable changes has been in the purchasing area, where industrial buyers frequently have made deliberate efforts to establish stronger relationships with suppliers. Although recent research has generated considerable insight into the nature of such relationships, the existing literature is incomplete in several important respects. In particular, the performance implications of adopting particular forms of relationships are virtually undocumented in the extant literature. This article draws on transaction cost theory (TCA) to propose that: (1) crafting stronger relationships is partly a response to the presence of uncertainty and transaction-specific assets and (2) structuring relationships in accordance with TCA prescriptions should have positive performance implications. Regression analysis conducted in a sample of OEM-supplier relationships shows good support for our hypotheses.

Interfirm monitoring, social contracts, and relationship outcomes

This article examines the effects of monitoring on interfirm relationships. Whereas some research suggests that monitoring can serve as a control mechanism that reduces exchange partner opportunism, there is also evidence showing that monitoring can actually promote such behavior. The authors propose that the actual effect of monitoring depends on (1) the form of monitoring used (output versus behavior) and (2) the context in which monitoring takes place. With regard to the form of monitoring, the results from a longitudinal field study of buyer–supplier relationships show that output monitoring decreases partner opportunism, as transaction cost and agency theory predict, whereas behavior monitoring, which is a more obtrusive form of control, increases partner opportunism. With regard to the context, the authors find that informal relationship elements in the form of microlevel social contracts serve as buffers that both enhance the effects of output monitoring and permit behavior monitoring to suppress opportunism in the first place.

Performance of Commercial Television Stations as an Outcome of Interorganizational Linkages and Environmental Conditions

This study explored the effects of interorganizational linkages as a moderator between organizational performance and environmental conditions. Analyses covered 145 commercial television stations i...

Vertical territorial restrictions and public policy: Theories and industry evidence

Territorial restrictions long have been the subject of intense policy debate. The central issue in this debate has been whether such distribution arrangements are deployed tor efficiency or anticompetitive purposes. The authors add to the debate by broadening the existing conceptualization ot business efficiency and providing evidence of the importance of efficiency considerations in the decision to deploy restrictions. In the past, efficiency often has been viewed narrowly, in terms of giving distributors incentives to provide free-rideable services. The authors show that information asymmetry and transaction costs also represent important efficiency-based explanations of territorial restrictions. With regard to anticompetitive concerns, their results show that manufacturers are more likely to use territorial restrictions when they face competition ex ante. Ultimately this may reduce interbrand competition. From a public policy perspective, their pattern of results supports the current rule of reason treatment of territorial restrictions in the United States. At the same time it questions the current European policy of per se illegality.

Why Do Customers Get More Than They Need? How Organizational Culture Shapes Product Capability Decisions

The capability level of a product that a firm provides to a customer is an important marketing decision. In the extant literature, the normative heuristic for this decision is one of matching—of providing product capability levels that meet customer needs. However, industry evidence suggests that supplier firms routinely make product decisions that lead to “overshot” customers, whereby customers receive products with capabilities that exceed their requirements. The authors demonstrate how a supplier firms organizational culture can cause overshooting scenarios and how these effects can be attenuated to the extent that the focal firms basic values also reflect a customer orientation.

Managing gray markets through tolerance of violations: a transaction cost perspective

Exclusive territory distribution arrangements are commonly observed in many markets. Once deployed, such arrangements are often subject to gray market activity, in the form of unauthorized sales which violate assigned restrictions. Interestingly, however, firms frequently choose to tolerate violations, rather than pursuing complete enforcement (i.e., by terminating violators) or abandoning exclusivity entirely. We draw from the literature on transaction cost economics to propose that tolerance of gray market activity is a function of a firms ability to detect violations, and of the existence of credible threats and commitments. We also draw on the traditional literature on exclusive territories to suggest that minimizing distributor free-riding on services, which influences the decision to use exclusive territories in the first place, continues to be a concern after deployment. We collect micro-level data and test our predictions through a survey of managers who were responsible for the distribution decisions in their respective companies. Our results suggest that tolerance of violations is influenced both by transaction cost and free-riding considerations.