Private brands, governance, and relational exchange within retailer–manufacturer relationships: Evidence from Irish food manufacturers supplying the Irish and British grocery markets

Abstract

This study adopts the transaction cost framework to shed light upon governance structures within the context of retailer–manufacturer relationships. It argues that a retailer's investment in establishing itself as a retail brand is frequently based on the willingness of manufacturers to make specific investments. Two complementary flows of quasi-rents are created, resulting in a safeguarding problem for both parties. The appropriate governance structure is posited as a solution to this issue. Based on an empirical analysis of 104 trading relationships between Irish food manufacturers and their Irish and British retail customers, the authors find that the degree of relational exchange, or “closeness,” established between food retailers and manufacturers is positively related to both parties' specific investments, perceptions of interdependency, expectations of relationship continuity and attractiveness, but negatively related to symmetric dependency and retailers' ability to sanction their suppliers. [EconLit Classification: L220]. © 2006 Wiley Periodicals, Inc. Agribusiness 22: 1–20, 2006.

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