The Salesperson as Outside Agent or Employee: A Transaction Cost Analysis

Published on Jan 1, 2008in Marketing Science2.49
· DOI :10.1287/mksc.1070.0333
Erin Anderson33
Estimated H-index: 33
(UPenn: University of Pennsylvania)
This descriptive study explores the reasons for integration of the personal selling function, i.e., the use of employee (“direct”) salespeople rather than manufacturers' representatives (“reps”). A hypothesized model is developed based on both transaction cost analysis and the sales force management literature. Data from 13 electronic component manufacturers covering 159 U.S. sales districts are used to estimate a logistic model of the probability of “going direct” in a given district. Results are shown to be stable across specification and estimation methods and to fit the data well. The transaction cost model is generally supported. The principal finding is that the greater the difficulty of evaluating a salesperson's performance, the more likely the firm to substitute surveillance for commission as a control mechanism, i.e., to use a direct sales force. Among other findings, direct sales forces are also associated with complex, hard-to-learn product lines and with districts that demand considerable nonselling activities. Several factors prove unrelated, including company size, the amount of travel a district requires, and the importance of key accounts. This article was originally published in Marketing Science, Volume 4, Issue 3, Pages 234--254, in 1985.
  • References (35)
  • Citations (649)
Published on Jan 1, 2008in Marketing Science2.49
Timothy W. McGuire13
Estimated H-index: 13
(CMU: Carnegie Mellon University),
Richard Staelin44
Estimated H-index: 44
(Duke University)
This paper investigates the effect of product substitutability on Nash equilibrium distribution structures in a duopoly where each manufacturer distributes its goods through a single exclusive retailer, which may be either a franchised outlet or a factory store. Static linear demand and cost functions are assumed, and a number of rules about players' expectations of competitors' behavior are examined. It is found that for most specifications product substitutability does influence the equilibriu...
Published on Jan 1, 2008
C.P. Mahajan1
Estimated H-index: 1
Published on Jan 1, 2005
J.J.H. Bartholomée1
Estimated H-index: 1
(UG: University of Groningen),
K. Kempf-Leonard1
Estimated H-index: 1
Published on May 1, 1985in Marketing Science2.49
Anne T. Coughlan20
Estimated H-index: 20
(UR: University of Rochester)
This paper discusses the problem of choosing a vertical marketing channel in a product-differentiated duopolistic market. Firms choose product price and the form of the marketing channel to maximize profits. It is shown that integration of the marketing function results in greater price competition and lower prices than does the use of independent marketing middlemen. The profitability of reducing price competition by using such middlemen is investigated. Two hypotheses---that integration is neg...
Published on Feb 1, 1985in Marketing Science2.49
Roland T. Rust55
Estimated H-index: 55
(University of Texas at Austin),
David C. Schmittlein23
Estimated H-index: 23
(UPenn: University of Pennsylvania)
There are many situations in marketing in which several alternative quantitative models may be built to model a particular marketing phenomenon or system. Few methods exist for comparing the fit of such models if the models are not nested, especially if their performance on each of several criteria is important. This paper proposes a Bayesian cross-validated likelihood BCVL method for comparing quantitative models. It can be used when the models are either nested or nonnested, and is especially ...
Published on Jan 23, 1984in The RAND Journal of Economics1.63
Erin Anderson33
Estimated H-index: 33
David C. Schmittlein23
Estimated H-index: 23
This article develops and tests a model of integration of a marketing function, personal selling. The model, derived from transaction cost analysis as developed principally by Williamson, is formulated as a logistic function, which is estimated with data from the electronic components industry. As expected, integration is associated with increasing levels of asset specificity, difficulty of performance evaluation, and the combination of these two factors. Contrary to the transaction cost model, ...
Published on Jun 1, 1983in Journal of Consumer Research4.70
Lee G. Cooper18
Estimated H-index: 18
Masao Nakanishi9
Estimated H-index: 9
To use multiplicative competitive interaction (MCI) models as part of a theory of the evaluative process in choice, we need a method to transform interval scale consumer judgments into positive, ratio scales. We develop a coefficient—zeta-squared—that possesses the needed scale requirements and other theoretically desirable properties, and report four research studies to demonstrate the diversity of applications of multiplicative choice models using zeta-squared. We also discuss the relations of...
Published on Nov 1, 1981in Journal of Marketing Research4.20
Lynn W. Phillips1
Estimated H-index: 1
(Harvard University)
The author examines the reliability and validity of measures of organizational characteristics used in previous marketing studies in the areas of strategic planning and distribution channels. Key informants in 506 wholesale-distribution companies provided reports on (1) characteristics of the firm's product portfolio and (2) characteristics of the firm's power-dependence relations with its major suppliers and customers. In contrast to previous investigations, which sampled only a single informan...
Published on Nov 1, 1981in American Journal of Sociology4.46
Oliver E. Williamson70
Estimated H-index: 70
The transaction cost approach to the study of economic organization regards the transaction as the basic unit of analysis and holds that an understanding of transaction cost economizing is central to the study of organizations. Applications of this approach require that transactions be dimensionalized and that alternative governance structures be described. Economizing is accomplished by assigning transactions to governance structures in a discriminating way. The approach applies both to the det...
Cited By649
Aric Rindfleisch25
Estimated H-index: 25
(UIUC: University of Illinois at Urbana–Champaign)
Transaction cost theory emerged over 80 years ago yet still continues to exert an important influence on marketing thought. In this article, I examine the past, present and future of this important theory by exploring the work of three of its key scholars: Ronald Coase, Oliver Williamson and Yochai Benkler. This examination provides an overview of each scholar’s ideas, a look at their intellectual influences, and an assessment of their impact on marketing scholarship. In addition to this in-dept...
Martin M. Greller3
Estimated H-index: 3
(The New School),
Sean Valentine27
Estimated H-index: 27
(UND: University of North Dakota)
Corporate social responsibility (CSR) connects organizations with various environments and constituencies. CSR is enacted through governance and strategic processes, yet this can cause distortions as the process conforms to an agency theory narrative. This paper analyzes the role agency plays in CSR and offers an alternative (the leasehold approach) that uniquely describes the relationships among owners, organizational leadership, and contemporary management practices. An alternative to the exis...
Said Echchakoui3
Estimated H-index: 3
(Université du Québec),
Rachid Ghilal (Université du Québec)
Abstract This study uses the Markov chain and agency theory to demonstrate a link between a salesperson's perceived attributes with customer retention and both optimal effort and commission, using a relational perspective. The purpose is to show sales managers that, with a customer survey, they can use perceived sales force attributes to monitor and motivate employees during relationship marketing. This paper also demonstrates that optimal sales force compensation drives salespeople to enhance p...
Published on Apr 23, 2019in Journal of Management & Governance
Juehui Shi (SUNY: State University of New York System), Jurriaan de Jong1
Estimated H-index: 1
(SUNY: State University of New York System)
This study aims to investigate the effects of firm performance and diversification on the insider/outsider CEO hiring. Using a sample of 2204 CEO succession events occurred between 1979 and 2014 in the U.S., we find that the effect of firm performance on the likelihood of hiring insider CEOs is positive and significant, which is consistent with Datta and Guthrie (1994). Moreover, the impact of the level of firm diversification on the likelihood of hiring insider CEOs is also positive and signifi...
Published on Mar 4, 2019in Journal of Business & Industrial Marketing1.96
Gerard A. Athaide14
Estimated H-index: 14
(Loyola University Maryland),
Jason Q. Zhang5
Estimated H-index: 5
(Loyola University Maryland),
Richard R. Klink14
Estimated H-index: 14
(Loyola University Maryland)
Purpose The purpose of the paper is to develop and test a contingency model of buyer involvement when developing new products in technology-based industrial markets. Information Dissemination and degree of product co-development are identified as two behavioral dimensions of seller–buyer relationships. Further, the paper proposes that perceived buyer knowledge, innovation discontinuity, product customization and technological uncertainty moderate the impact of the behavioral dimensions on seller...
Published on Mar 1, 2019in Industrial Marketing Management4.78
Valerie Good (MSU: Michigan State University), Roger J. Calantone65
Estimated H-index: 65
(MSU: Michigan State University)
Abstract Executives and researchers continue to seek factors that lead to new product success. While prior research has suggested that outsourcing the selling function can help make the innovation process leaner and limit future liability, outsourcing can also pose risks in terms of safeguarding both customer relationships and confidential innovation capabilities. Moreover, examining the effects of outsourcing has been identified as a key research priority in recent marketing literature. Thus, u...
Published on Jan 1, 2019in Strategic Management Journal5.57
Aaron K. Chatterji16
Estimated H-index: 16
(Duke University),
Colleen M. Cunningham8
Estimated H-index: 8
(LBS: London Business School),
John Joseph10
Estimated H-index: 10
(UCI: University of California, Irvine)
Research Summary: We explore how interorganizational relationships shape firm boundary decisions. Using data on 545 U.S. medical device manufacturers' product portfolios and sales‐governance choices (i.e., internal or external sales forces) from 1983 to 1996, we find relational capital between manufacturers and external sales forces influences future firm boundary decisions. Relational capital lowers the likelihood of integrating the sales function, but only when firms remain focused on the same...
Published on Dec 1, 2018in Netnomics
Naima Saeed4
Estimated H-index: 4
(University of Agder),
Dong-Wook Song23
Estimated H-index: 23
(World Maritime University),
Otto Andersen10
Estimated H-index: 10
(University of Agder)
Transaction cost analysis (TCA) has been applied in a wide range of academic disciplines, including economics, marketing, sociology, organization theory, and business strategy. Literature in maritime transport has had limited exposure to this versatile theoretical framework. This paper aims at developing a conceptual model that describes governance strategies that various players within the maritime sector can adopt to mitigate congestion at ports. A TCA is used to examine port congestion mitiga...
Published on Dec 1, 2018in Industrial Marketing Management4.78
Hidesuke Takata1
Estimated H-index: 1
(Keio: Keio University)
Abstract This study focuses on manufacturers' selection of dual or indirect channels. Although several previous studies based on transaction cost theory investigate transaction cost factors in choosing dual or indirect channels mainly in the United States, this study examines transaction costs and capability factors for such a choice in Japan. The relationships are tested with survey data from Japanese industrial goods manufacturers ( n = 429). Compared to previous studies, this study presents t...
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