Channel power, commitment and performance toward sustainable channel relationship

The primary purpose of this article is to expand our understanding of the sophisticated utilization of independent incentives and its influence on channel relationship commitment and performance toward sustainable channel relationship and competitive advantage. On the basis of a conceptual framework, this paper develops an analytical model to explore the correlations among channel power, relationship commitment and channel performance under the implementation of diverse independent incentives. The proposed model is empirically tested using LISREL and questionnaire survey data sampled from the liquid crystal display TV manufacturer-dealer channels of the optoelectronic industry in Taiwan. The results reveal that the sophisticated utilization of independent incentives through channel relationship commitment as the key mediator determines the channel performance; furthermore, relative to contractual incentives, relationship-building incentives appear to be more effective in promoting channel relationship commitment, thus leading to superior channel performance toward the ultimate goal of sustainable channel relationship management.     

分散决策下的双渠道供应链补偿策略——基于消费者渠道选择行为

为了有效解决由于对消费者的争夺从而引发的渠道之间关于定价、服务水平、利润等方面的冲突,基于消费者渠道选择行为,构建了网络直销市场与传统零售市场需求模型和双渠道供应链利润模型,运用Stackelberg模型,在制造商与零售商实施分决策时,通过制造商对零售商实施补偿激励前后的对比,分析了消费者渠道选择行为对网络直销渠道和传统零售渠道定价、制造商与零售商利润以及供应链总利润的影响,并求得最优定价及制造商的最优补偿额度和零售商的最优销售努力水平,进行了不同情况下的双渠道供应链利润的比较分析。结果表明,无论制造商是否实施补偿激励,都应随着网络消费者比例的增加而增加其网络直销价格;零售商的零售渠道价格应根据网络消费者比例的增加先降低到一定水平后再提升。当更多的消费者选择网络直销渠道时,制造商的补偿激励水平和零售商的销售努力程度均会下降。制造商应提高其补偿水平,进而激发零售商提高销售的努力水平,并使双方利润及供应链总利润最大化。研究结果为基于消费者选择行为的供应链补偿研究提供了新方法,对双渠道的供应链补偿研究有借鉴意义。     

Incentives,Monitoring, and Employee Stock Ownership Plans: New Evidence and Interpretations

This paper reviews the theory and evidence for agency theory‐based explanations for employee stock ownership plans found in the financial participation literature. The UK Workplace Employee Relations Survey 1998 is used to test whether share plans substitute for direct monitoring and individual incentives. Contrary to some predictions in the literature, individual incentives are found to be complements of share plans, while other measures of monitoring costs provide mixed results. However, it is found that monitoring costs and a wide range of performance targets explain the conjunction of stock plans and individual incentives. It is suggested that share plans are used to mitigate dysfunctional effects of individual incentives by engendering cooperation and trust, and by broadening the range and time frame of desired performance outcomes.     

Designing channel incentives to overcome reseller rejection

As more and more products are distributed through independent channel resellers, suppliers find it increasingly difficult to craft highly motivational incentive packages. Instead, many suppliers' product lines are neglected by resellers in deference to more compatible incentive offers. This paper studies the many aspects of incentive rejection and incentive compatibility and prescribes a four-step, theory-based process to help suppliers craft attractive incentive programs. The process involves identifying resellers' performance needs, recognizing how each need suggests a different basis for incentive rejection, and designing an incentive package such that the incentives support specific reseller needs. Also, unique channel conditions are considered.     

Developing benchmarks to capture relative performance for sales force incentives decisions: Lessons from B2B insurance industry

Performance-based incentives are widely used in B2B sales; however, sales managers find it challenging to customize such incentives. In response, we propose a new methodology to assess salespeople's capability using performance history data. To evaluate relative performance, we filter out the impact of systematic factors of job characteristics (e.g., channel type, territory, and market size). Therefore, by providing appropriate benchmarks, our approach captures the idiosyncratic component of performance, allowing a direct comparison of a salesperson with other counterparts in the firm. We also account for prospective customer characteristics that let us distinguish between competent salespeople and those fortunate enough to have a customer mix with a high predisposition to buy. Using a data set of automobile insurance sales to small business owners in the U.S., we model salesperson performance as consisting of three stages: generating leads, converting leads to customers and upselling. Our output, a “grade card” for each salesperson, contains metrics that can aid managers in setting individual level performance goals, in deciding who should be rewarded or let go, and in diagnosing salespeople's strengths and weaknesses. Our easy to implement methodology is useful for a wide variety of applications, wherever relative performance needs to be judged.     

Total cost/response rate trade-offs in mail survey research: impact of follow-up mailings and monetary incentives

This article reports results of a mail survey experiment in which several response-inducement methods were manipulated. The experiment assesses the impact of follow-up mailings and monetary incentives on total cost/response rate trade-offs. Experimental findings lead to a number of recommendations for researchers and managers who conduct mail surveys. First, follow-up mailings and monetary incentives should be used to maximize response rate. Second, given a limited budget for survey administration, follow-up mailings are preferred over monetary incentives. Third, if there is limited time for survey administration, monetary incentives may be preferred over follow-up mailings. Finally, follow-up mailings have the added benefit of enabling nonresponse bias estimation.     

Low-powered vs high-powered incentives: Evidence from German electricity networks

We propose a difference-in-differences approach to estimating the impact of incentives on cost reduction in the context of German electricity networks. When subject to a lower-powered regulation mechanism, relatively more efficient operators pile up more costs in the year used to determine future prices. This pattern is consistent with the idea that incentives matter: higher-powered incentives lead to cost reduction. The results are also consistent with an equilibrium where more efficient firms pool with less efficient ones under the threat of ratcheting.     

Legitimacy building strategies in conditions of discretionary legal enforcement: A logic of social action approach

The present study explores strategies used to legitimize the transfer of organizational practices in a situation of institutional upheaval. We apply the logic of social action (Risse, 2000) to analyze the effectiveness of consequence-based action and communication-based action, in terms of higher coordination, lower conflict, and overall higher economic performance. Consequence-based legitimation is obtained by using a system of distributor incentives tied to performance of specific tasks, while communicative legitimation can be achieved by recommendations and warnings. Our setting is an export channel to European emerging economies. Our results indicate that in the absence of legitimacy, as manifested in discretionary legal enforcement, consequence-based legitimation is more effective than communicative legitimation in reducing conflict, increasing coordination, and ultimately in improving the performance of the export dyad.     

Agents’ incentives under buy-back contracts in a two-stage supply chain

This paper investigates how the behavior of individual decision makers can affect the performance of a supply chain. We study a two-stage supplier–retailer system, using a buy-back contract. Each firm's actions are executed by an agent. The retailer's purchasing agent and the supplier's sales agent are compensated based on certain performance measures, and they act accordingly. We study the impacts of their behavior in both the supplier-as-leader and retailer-as-leader settings. We find that, unless their incentives are carefully constructed, the agents can strongly distort the system's behavior. Specifically, “channel stuffing” (packing the distribution channel with excess inventory) can occur in both settings. Only when the agents are compensated based on net profit do they act in accord with their firms’ objectives. These results may help explain some recent scandals.     

Do physician incentives affect hospital choice? A progress report

The US health reforms of March 2010 introduced new provisions for physicians providing Medicare and Medicaid services to be given financial incentives to control costs. Physician payment mechanisms generating similar incentives are currently used by some health maintenance organizations in California. We describe an ongoing research project in which we investigate physician responses to these payment schemes. The question is whether patients whose physicians have incentives to control hospital costs are admitted to lower-priced hospitals than other patients, all else equal. We provide an initial analysis of California hospital discharge data from 2003, documenting evidence consistent with this hypothesis.     

Platform Investment and price parity clauses*

Platforms use price parity clauses to prevent sellers setting lower prices when selling through other channels. They claim these restraints are needed so platforms have incentives to invest in providing search services—without them, consumers would search on the platform but then switch to buy in a cheaper channel. In a model incorporating these effects, we find that wide price parity clauses lead to excessive platform investment while narrow (or no) price parity clauses lead to insufficient platform investment. Taking these investment effects into account, wide price parity clauses lower consumer surplus but have ambiguous effects on total welfare.     

Influences of top management team incentives on firm risk taking

In our work, the influences on subsequent firm risk taking of fixed incentives relative to variable incentives as well as the separate effects on subsequent corporate risk taking of variable incentives are examined. Focusing on the top management team members, we find a higher proportion of incentives that are devoted to fixed incentives relative to variable incentives tend to be inversely associated with subsequent firm risk taking. Managerial stock options are directly and uniformly associated with subsequent corporate risk taking. Executive shareholdings, however, display a curvilinear relationship with subsequent enterprise risk taking. Copyright © 2007 John Wiley & Sons, Ltd.     

Policy-Induced Technology Adoption: Evidence from the U.S. Lead Phasedown

Theory suggests that economic instruments, such as pollution taxes or tradable permits, can provide more efficient technology adoption incentives than conventional regulatory standards. We explore this issue for an important industry undergoing dramatic decreases in allowed pollution – the U.S. petroleum industry's phasedown of lead in gasoline. Using a duration model applied to a panel of refineries from 1971–1995, we find that the pattern of technology adoption is consistent with an economic response to market incentives, plant characteristics, and alternative policies. Importantly, evidence suggests that the tradable permit system used during the phasedown provided incentives for more efficient technology adoption decisions.     

Employment Protection,Threat and Incentive Effects on Worker Absence

This article provides new evidence on the effect of changes in employment protection on worker absence. We use novel multi‐organization data to examine changes in worker absence as workers move from temporary to permanent employment contracts. We demonstrate a robust positive effect of employment protection on sickness absence. It has also been suggested that the impact of employment protection on absence and effort is due to a fear of dismissal. We also provide evidence that suggests that temporary workers' absence is influenced by incentives to attain jobs with protection that is unrelated to threat of dismissal. This has not been considered in earlier research. This channel of employment protection effects has important policy implications.     

Innovation, Rent Extraction, and Integration in Systems Markets

We consider innovation incentives in markets where final goods are systems comprising two strictly complementary components, one of which is monopolized. We focus on the case in which the complementary component is competitively supplied and innovation is important. We explore ways in which the monopoly may have incentives to extract efficiency rents in the competitive sector, thus weakening or destroying incentives for independent innovation. We discuss how these problems are affected if the monopolist integrates into supply of the complement.     

The effects of buyer-supplier's collaboration on knowledge and product innovation

Drawing on marketing and management literature, this study investigates integration mechanisms between channel members. Specifically, the research framework is built upon the buyer-supplier gray-box integration approach, knowledge-based view, and agency theory. This study identifies and compares the effects of two gray-box integration mechanisms, namely supplier task involvement and joint planning, on two kinds of knowledge acquisition. I find that both supplier task involvement and joint planning positively influence manufacturers' product knowledge acquisition and end customer knowledge acquisition. Supplier task involvement has a stronger effect on knowledge acquisition than joint planning. The relationships between integration mechanisms and knowledge acquisition are contingent upon supplier incentives. Furthermore, this study also extends the literature by comparing the effects of two different kinds of knowledge on product innovation performance. Even though both product and end customer knowledge lead to better product innovation performance, end customer knowledge has a stronger effect than product knowledge on product innovation performance. Theoretical and managerial implications are discussed at the end.     

Access regulation and the incumbent investment in quality-upgrades and in cost-reduction

This papers studies if access price regulation has an impact on incumbents’ incentives to invest in their network that might differ according to the nature of investments, that is, quality-upgrading and cost-reducing. It is shown that if the marginal cost of quality-upgrading is very low both types of investment are increasing in the access price. If the marginal cost of cost-reducing is very low, both investments decrease after an increase in the access price. Otherwise, a high access price increases the incentives for quality-upgrading and reduces the incentives for cost-reducing. Therefore, regulators should set a higher access price the lower is the marginal cost of quality-upgrading as compared to the marginal cost of cost-reducing.     

Food safety and product liability

This paper focuses on the U.S. product liability system for food poisoning cases and makes six key points. First, current legal incentives to produce safer food are weak, though slightly stronger in outbreak situations and in markets where foodborne illness can be more easily traced to individual firms. Far less than 0.01% of cases are litigated and even fewer are paid compensation. Second, even if potential plaintiffs can overcome the high information and transaction costs necessary to file lawsuits, monetary compensation provides only weak incentives to pursue litigation. Firms paid compensation in 56% of the 294 cases examined in this study and the median compensation was only $2,000 before legal fees. Third, indirect incentives for firms may be important and deserve more research. For example, firms may be influenced by costly settlements and decisions against other firms in the same industry. Fourth, confidential settlements, health insurance, and product liability insurance distort legal incentives to produce safer food. Fifth, the ambiguity about whether microbial contamination is “natural” or an “adulterant” hinders the legal system from effectively dealing with food safety issues. Sixth, a brief comparison of the incentives from U.S. and English legal systems suggests that more research is needed to understand the strengths, weaknesses, and relative impact of each country's legal system on the incentives to produce safer food.     

Equity‐based incentives and collaboration in the modern multibusiness firm

Research summary : This paper examines the role of equity‐based incentives in fostering cross‐business‐unit collaboration in multibusiness firms. We develop a formal agency model in which headquarters offers equity and profit incentives to business‐unit managers with the objective of maximizing total expected firm returns. The resulting compensation contract provides a rich mechanism for aggregating value from collaborative interactions across business units, aligning managers' efforts with the firm's growth prospects and organization structure and managing the dual risks in profits and firm market value. The inclusion of equity incentives elicits higher levels of own‐unit and collaborative efforts over the profits‐only contract. Our results suggest that equity‐based incentives are most beneficial when profitability is uncertain relative to long‐term growth prospects, in firms pursuing related diversification strategies, and in periods of rising equity markets. Managerial summary : Equity‐based compensation such as restricted stock grants and options are increasingly common, not only for CEOs and other top executives, but also for business unit managers and other non‐C‐suite employees. The paper studies the role of such “global” incentives in enabling multibusiness firms to benefit from cross‐unit collaboration. Results from our model show that managerial contracts that include appropriate levels of equity incentives, in addition to profit‐based incentives, generate higher own‐unit and collaborative efforts. We also find that equity incentives are likely to be most beneficial for large firms in high‐growth sectors, for firms pursuing a related diversification strategy, and in periods of rising stock markets. The model can also provide useful guidance on designing return‐maximizing compensation contracts for business unit managers in different firm, organizational, and industry contexts. Copyright © 2015 John Wiley & Sons, Ltd.