Forward channel integration and performance: An application of transaction cost economics and the misalignment concept

Abstract

Research on forward channel integration (‘direct’ integrated sales force vs. ‘indirect’ non-integrated reps) in the marketing literature has predominantly been conducted based upon transaction cost economics (TCE). Several studies have confirmed that TCE succeeds in predicting channel-integration decisions for several transaction cost factors, such as the degree of transaction frequency. However, there are no insights into how far an alignment with TCE's prescriptions positively impacts firm performance. The present study examines the performance consequences of TCE's prescriptions based upon the misalignment concept, which is borrowed from related research streams. The research model is tested with a sample of 196 young firms. Findings suggest that, in accordance with previous research, some channel-integration decisions can be explained by TCE while others are not supported. The results also confirm that the normative value of the TCE acts in line with TCE's prescriptions (e.g. direct distribution channels in case of asset specificity) and positively impacts performance.

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