Strategy and control in supplier-distributor relationships: An agency perspective

Abstract

This paper examines the influence of competitive strategy on the relationship between suppliers and their distribution networks. Drawing on agency theory, hypotheses are developed specifying the appropriate match between manufacturer strategies and systems of control within distribution channels. Cluster analysis is used to show distinct differences in channel management and structure for the three generic strategies of cost leadership, differentiation and focus. Results suggest that variation in control relationships may be explained by the demands posed by manufacturers' competitive strategies. This study therefore extends the applicability of Porter's typology to the specific structure of distribution channels and shows that agency theory can provide insights into the economic basis of interorganizational relationships.