Economic development and channel evolution in The People's Republic of China

Abstract

Purpose The objective of this study is to develop a model for analyzing the relative importance of facilitating and constraining factors that determine changes in the structure of distribution channels as a country progresses along the path of economic development. Design/methodology/approach Data on channel structure were collected on national, regional and municipal levels. The hypotheses in this study were tested by using time series and cross‐sectional data. The ordinary least squares method was used for multiple regression and correlation analyses. Findings The most significant findings from the above research are that channel structure is determined by economic development and, to some extent, by government policy. Both of these factors work hand‐in‐hand to affect distribution reform. First, economic development provides the need for more efficient channels, first as more privately‐owned intermediaries enter the distribution system, and later as the number of channel intermediaries contracts, partly stemming from vertical integration and from a shakeout of less efficient enterprises. Second, government policy can be formulated to encourage these developments. In order to promote distribution reform, the government's “open policy”, which allows for market access by foreign firms as well as local ones, should be continued. Research limitations/implications More cross‐sectional data for China are needed in order to better analyze the impact of different economic sectors (at different levels of development) on channel evolution. As more data become available, these analyses will be possible. Originality/value Very little is known about the factors that shape a nation's channel system. Improvements in distribution systems are crucial to upgrading marketing systems in developing countries. Understanding how improvements in distribution systems contribute to economic development can aid decision makers in developing countries to improve resource allocation. This study has contributed to the theory of channel evolution in developing countries.

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