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Factors affecting negotiation process and outcomes in continuing channel relationships

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Title:
Factors affecting negotiation process and outcomes in continuing channel relationships
Creator:
Ganesan, Shankar
Publication Date:
Language:
English
Physical Description:
xiv, 289 leaves : ill. ; 29 cm.

Subjects

Subjects / Keywords:
Conflict resolution ( jstor )
Financial investments ( jstor )
Marketing ( jstor )
Mathematical independent variables ( jstor )
Problem solving ( jstor )
Retail industries ( jstor )
Retail stores ( jstor )
Syntactical antecedents ( jstor )
Trust ( jstor )
Vendors ( jstor )
Dissertations, Academic -- Marketing -- UF
Marketing -- Management ( lcsh )
Marketing thesis Ph.D
Retail trade -- Management ( lcsh )

Notes

Thesis:
Thesis (Ph.D.)--University of Florida, 1991.
Bibliography:
Includes bibliographical references (leaves 276-288).
General Note:
Typescript.
General Note:
Vita.
Statement of Responsibility:
by Shankar Ganesan.

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University of Florida
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University of Florida
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Copyright [name of dissertation author]. Permission granted to the University of Florida to digitize, archive and distribute this item for non-profit research and educational purposes. Any reuse of this item in excess of fair use or other copyright exemptions requires permission of the copyright holder.
Resource Identifier:
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25215736 ( OCLC )
AJA4972 ( NOTIS )

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FACTORS


AFFECTING NEGOTIATION
CONTINUING CHANNEL


PROCESS AND OUTCOMES
RELATIONSHIPS


SHANKAR


GANESAN


A DISSERTATION PRESENTED TO THE GRADUATE SCHOOL
OF THE UNIVERSITY OF FLORIDA IN PARTIAL FULFILLMENT
OF THE REQUIREMENTS FOR THE DEGREE OF
DOCTOR OF PHILOSOPHY

































Copyright


Shankar


1991


anesan






























To my parents.















ACKNOWLEDGEMENTS


wish


express


sincere


appreciation


faculty,


staff


, and


students


Marketing


Department


University


Florida.


First


all,


wish


express


my gratitude


appreciation


advisor


Dr. Barton


Weitz


expert


advice,


to ler ance,


encouragement


being


a role


model


can


follow


rest


research


career


.My


special


thanks


also


to Dr.


John


Lynch,


whose


encouragement


advice


were


instrumental


success


dissertation.


would


also


like


thank


other


members


faculty


University


Florida:


Professors


Rich


Lutz


Alan


Sawyer


offering


critical


comments


during


initial


stages


this


dissertation.


would


also


like


take


this


opportunity


thank


Center


Retailing


of Florida


Education


sponsoring


this


Research


dissertation


University


research.


thanks


to all


staff


members


Center


Retailing


, especially


Kathy


Brown.


Due


to the


confidential


nature


data


collected


this


dissertation,


may










appreciate


time


taken


these


individuals


completing


questionnaires.


Finally


wish


express


my deep


appreciation


wife


Rama


, for


being


a constant


source


of moral


support


over


last


three


years.

















TABLE OF CONTENTS


ACKNOWLEDGEMENT

LIST OF TABLES

LIST OF FIGURES


ABSTRACT


S


.(( S (() *( S( I( S) I() *I S *(I S 405SSS SSS59S SSSSSS


. .. 0 . .. ....Vlll

..... .. ....................... X

I *


. . .. Xll


CHAPTERS


1 INTRODUCTION


* SS S 5 5* SSS 0 5 S ** S SSS SS *S S*a *a 1


Need to Manage Conflicts ........................
Conflict in Manufacturer-Retailer Relationships
Role of Negotiations in Conflict Resolution .....
Unresolved Issues ... .. ...... .. .
Importance of Continuing Relationships ..........
Negotiations in Continuing Relationships ...
Organization of the Dissertation ................


.. .....2





S.. ... 10
... ...12


REVIEW OF THE LITERATURE .............................. 14


Overview ........ .. .. ..
Definition of Various Forms of Exchange ..........
Characteristics of Market and Relational Exchanges ..
Consequences of Relational Exchanges ...............
Key Factors Governing Relational Exchanges .........
Summary .. ... .. ............. ... ..


..14
S. 14
..16
..22
..27
..54


3 CONCEPTUAL FRAMEWORK .. .. ...... ........ ............ 55


Overview .... .. .... .......... ......... .
Retailer's Expectation of Future Interactions .
Retailer's Long-Term Orientation ......... .....
Retailer's Initial Offer .......................
Message Sending Behavior and Disagreements .....
Conflict Resolution Strategies and Concessions
Negotiation Outcomes .... ...... .......... ...


. .. 55
S... ...55
S. 66
. .. 80
.. .... 85
. .89
.. ... 93











4 METHODOLOGY

Overview ...


Research Setting, Questionnaire Development,
Respondent Solicitation and Data Collection
Development of Measures ....................


Summary

RESULTS


* 4 .* S S S S
*. ..* S. ..*. ..*. ..*. S 5 5 5 5 5 5* S


Overview


Retailer's Expectation of Future Interactions
Retailer's Long-term Orientation ..........
Retailer's Initial Offer .. .............
Message Sending Behaviors and Disagreements
Conflict Resolution Strategies ...............


........ 173


Retailer and -Vendor


Concessions


...... ... 206


Satisfaction with the Negotiations
Summary .. ...... .... .. .


... ..
.... .. .


6 DISCUSSION .. ............ ... 240


Overview


Contributions of the Dissertation .............


Directions for Future Research
Consequences for Practice ...


Limitations


Summary


* S S S S S S S S S S S S S
.............. S. .
. ... ... .0 .


* S S S S S S
* S S S S *
* S S S S S
* S S S S


APPENDICES


A SURVEY OF RETAIL BUYERS: PART A ......................

B SURVEY OF RETAIL BUYERS: PART B .....................

REFERENCES ................. .. ................. .. ....

BIOGRAPHICAL SKETCH .. .. ... .. ........ .............. .. ....















LIST OF TABLES


Frequency of Respondents


Relationship and


Dependence of


Based


Product


a Retailer


on the Nature of


Importance


on Vendor


Dependence of


Power


a Vendor on Retailer


Imbalance


Transaction Specific


Transaction Specific


Investments by the Retailer


Investments by the Vendor


Satisfaction with Past Negotiation Outcomes


Retailer' s


Trust


Vendor Organization .............. 16


4-9

4-10


Retailer's

Retailer's


Trust


Vendor's Representative


Expectation of Future


Interaction


*S .


Retailer's


Vendor's


Long -Term Orientation


Long-Term Orientation ..................... 166


4-13


Environmental


Uncertainty


Retailer's Message Sending Behavior


Vendor's Message


Sending Behavior


4-16


Retailer's


Use of


Conflict Resolution Strategies


4-17


Retailer's Satisfaction with


Means,


Standard Deviations,


Variables Affecting Retailer's


Future


the Negotiation


and Correlations of


Expectation of


Interactions









Means,


Standard Deviations,


and Correlations


Variables Affecting


Retailer's Long-Term


Orientation


Regression Equations and Estimated Standardized


Coefficients
Orientation


Retailer's Long-Term


Means,


Standard Deviations, .and


Correlations


Variables Affecting Retailer


Initial


Offer


Regression Equations and Estimated Standardized


Coefficients


Retailer


s Initial


Offer


Means,


Standard Deviations,


Correlations


Variables Affecting


Retailer's Message Sending


Behavior


the Level


of Disagreement


Regression Equations and Estimated Standardized


Coefficients


Behavior


Means,


Retailer


the Level


Standard Deviations,


Message Sending


of Disagreement


Correlations of
Use of Various


Variables Affecting Retailer's
Conflict Resolution Strategies


5-10


Analysis of


Retailer'


Use of Various Conflict


Resolution Strategies


5-11


Means,


Standard Deviations,


Correlations of


Variables


Affecting Retailer's


and Vendor'


Concession Behavior


Regression Equations and Estimated Standardized


Coefficients


Retailer'


and Vendor'


Concession Behavior


5-13


Means,


Standard Deviations,


Variables Affecting Retailer'


and Correlations of


Satisfaction with


Negotiations


5-14


Regression Equations and Estimated Standardized


Coefficients
Negotiations


Retailer


Satisfaction with















LIST OF FIGURES


Overview of


the Conceptual Framework ..................


Antecedents of
Interactions


a Retailer's Expectation of


Future


Antecedents of


a Retailer's Long-Term Orientation .... 101


Antecedents Affecting Other


Antecedents


Antecedents of


a Retailer's


Initial


Offer


Antecedents of


Level


of Disagreements Between


Retailers and Vendors


Styles


in Conflict Resolution ................


Determinants of


a Retailer's Conflict Resolution


Strategy


3-9a


Hypotheses re
Solving and
Strategies


latedd


the Retailer's


Use of


Problem


Compromise Conflict Resolution


3-9b


Hypotheses


related


the Retailer's use of


Aggressive Conflict Resolution Strategy


3-10


Effect of Retailer's Conflict Resolution Strategies
on Retailer's and Vendor's Concessions ............


3-11


Effect of Retailer's


Use of Conflict Resolution


Strategies and Concessions on Retailer's


Satisfaction with


the Negotiation


Antecedents of
Interactions


a Retailer's


Expectation of


Future


Antecedents of


a Retailer's


Long-Term Orientation ....


--









Effect


of Retailer'


on Retailer'


Retailer's


Conflict Resolution Strategies
Vendor's Concessions and


Satisfaction with Negotiation















Abstract of Dissertation Presented


the Graduate School


the University of
Requirements for


Florida


in Partial Fulfillment


the Degree of


Doctor


Philosophy


FACTORS AFFECTING NEGOTIATION PROCESS AND OUTCOMES
CONTINUING CHANNEL RELATIONSHIPS

By

Shankar Ganesan


May,


1991


Chairman:


Major


Barton A.


Department:


Weitz


Marketing


This dissertation describes a


study of


the antecedents


consequences of


a retailer's


long-term orientation in a


negotiation situation.


According


the conceptual


framework


proposed in


this


study,


retailers'


long-term orientation


function of


vendor


following:


organizations and


the degree


their


to which


representatives,


they trust


their


perception of vendors'


long-term orientation,


satisfaction


with past negotiations,


expectations of


future


interactions


with


vendors,


their dependence on


vendors and


vendors'


dependence on


them.


Similarly,


the hypotheses make










solving conflict


resolution strategies,


fewer


concessions and


a high level


of satisfaction with outcomes.


One hundred retail buyers


from six department


stores and


their


resources


provided


information


on their


relationship


on a major negotiation conducted between


them.


study


was conducted in


two phases:


the first


phase captured


retailers'


second phase,


long-term orientation and


the negotiation process


its antecedents and


and outcomes.


results


indicated


that


retailers'


long-term


orientation was affected by their perception


of vendors'


long-term orientation,


their


trust


in vendors'


representatives,


their


satisfaction with past negotiation


outcomes,


their


expectation of


future


interactions with


vendors,


the extent


to which


they depended on


vendors .


When


retailers made


initial


offer,


retailers'


perception of


the vendors


' long-term orientation


a significant


vendors made


effect on


initial


their


offer,


initial


vendors'


offer.


initial


When


offer was


significantly related


the retailers'


initial


offer.


Further


, the retailers'


initial


offer was significantly


related


to messages sent by both parties and


disagreements between


them.


level


strategy used by retailers


resolve conflicts depended on t


he extent of


disagreement and










compromising


strategy


resulted


in the


largest


concessions


both


parties.

















CHAPTER


INTRODUCTION


In recent


years,


a reduction


new


market


opportunities


increased


global


competition


forced


many


manufacturers


to place


greater


emphasis


on efficient


internal


operations

corporate


.To


improve


entities


have


their


internal


reassessed


efficiencies


their


corporate


, many

functions


such


as distribution.


This


reassessment


organizations


a more


balanced


emphasis


on the


needs


consumer


channel


intermediaries


. As


Stern


El-Ansary


(1988)


note,


Economic


middlemen
determine


Rather, the
distribution
interrelated


essence,


battles


versus


involving
middlemen


ultimate


relevant


system


producers


will


victors


unit


comprising


institutions


competitive


nature


not,
in the


versus


in the


competiti


an entire


agencies


producers


long


run,


marketplace.
on is an entire


network


(page


marketplace


forced


manufacturers


to achieve


channel


efficiencies


which


in turn


would


provide


them


a sustainable


competitive


advantage


channel


in the


marketplace.


intermediaries,


view


management


importance


conflicts


between


manufacturers


channel


members


become


a major


task


most


mananars











Need


to Manaae


Conflicts


In a distribution


channel,


even


though


role


each


channel


member


unique,


there


exists


operational


interdependence


between


channel


members.


This


interdependence


necessary


delivery


form,


time,


place,


possession


utilities


consumers


(Stern


-Ansary


1988)


In spite


this


interdependence,


capabilities,


expectations


, perceptions


, and


preferences


of channel


members


are


quite


different,


leading


to a state


latent


conflict.


many


situations,


this


latent


conflict


becomes


overt


channel


members


begin


to exert


their


influence


on each


other


(Etgar


Stern


1979


1971


Firat,


Tybout,


. Therefore,


Stern


a central


1975;


task


Rosenberg


channel


management


res


olve


manage


channel


conflicts


(Stern


Ansary


1988


.In


fact,


a survey


managers


dealing


with


channel


intermediaries


revealed


that


managers


spend


much


as one-fourth


their


time


on conflict


management


(Thomas


Schmidt


1976).


importance


conflict


management


in distribution


channels


literature.


generated


This


considerable


includes


research


empirical


marketing


measurement


conflict


Brown


1981;


enberg


Stern


1971)


, the










Sternthal,


Craig


1973


relationship


between


power


conflict


(Lusch


1976) .


This


suggests


that


conflict


distribution


channels


a pervasive


phenomenon


(Reve


Stern


1979) .


Conflict


Manufacturer-Retailer


Relationships


Conflict


between


channel


members


a retailing


environment


occurs


over


numerous


issues


Some


these


issues


are


markup,


terms


payment,


transportation


costs


, delivery,


advertising


allowances,


markdown


money.


Since


these


issues


retailer


encompass


elements


s profitability


can


of a retailing


be affected


mix,


quality


effectiveness


mechanisms


employed


to resolve


them.


retailing


environment,


strong


vendor


relations


can


help


retailer


develop


sustainable


competitive


advantage.


Retailers


with


strong


relationships


with


vendors


often


receive


merchandise


short-supply


, information


on new


best


selling


retailers


products,


receive


competitive


best


activity.


allowable


ces,


Further


, these


advertising


markdown


allowances


Clearly,


importance


resolving


conflicts


developing


long


-term


relationships


with


vendors


crucial


to the


survival


profitability


a retailing


organization.











Role


Negotiations


Conflic t


Resolution


Negotiations


play


a fundamental


crucial


role


many


marketing


contexts


including


manufacturer-dealer


retailer-vendor


relationships


a distribution


channel


buyer-seller


interactions


industrial


buying,


family


consumer


buying


decisions


. In


many


these


contexts,


strategies


such


as diplomacy


, exchange e


persons


adopting


superordinate


goals


Stern


El -Ansary


1988)


can


be employed

negotiations


as means


play


resolving


a vital


role


conflicts

effective


. However,

implementation


these


strategies


.As


Stern


1971)


indicates,


matter


what


makers


conflict


within


management


a channel,


mechanism


resolution


adopted


always


policy


result


bargaining--the


making


commitments,


offering


rewards,


threatening


punishments


or deprivation--between


among


members"


(page


132) .


Negotiation


occurs


in channel


situations


when


communication


is possible


when


each


party


only


an interest


in cooperating


with


other


party


order


to achieve


competing


a mutually


interests


beneficial


concerning


agreement,


specific


also


terms


that


agreement


(Schelling


1960


. As a result


many


recent


studies


have


focused


on bargaining


behavior


channel










et al.


1986


McAlister


, Bazerman,


Fader


1986


Neslin


Greenhalgh


1983


Schurr


Ozanne


1986).


Unresolved


Issues


In spite


recent


interest


negotiation


bargaining


importance,


most


these


studies


have


ignored


or chosen


ignore


some


characteristics


bargaining


a di


stribution


channel.


These


conceptual


models


have


not


dealt


with


the following


issues:


continuing


element


involved


baraainina


process.


Most


conceptualizations


dealing


with


bargaining


are


static,


sense


that


bargaining


occurs


between


parties


have


a large


investment


continuation


relationship


different


relationship


. The


from most


between


stribution


other


channel


channel


bargaining


members


environment


setting


occurs


substantially


longer


period


time


channel


partners


have


a strong


incentive


to continue


partnership


. This


long-


term


, continuing


aspect


channel


relationship


important


because


potential


benefits


coordinated


actions


high


investment


level


needed


to exploit


these


interdependencies


. Even


in conventional


channels


there


emphasis


on developing


long


-term


relationships


sole










sourcing


channel


intermediaries


. Therefore,


dynamics


such


a continuing


relationship


suggest


a need


take


into


account


impact


past


relationships


to consider


future


implications


a current


negotiation.


notion


of multiple


buyers


multiple


sellers.


Most


Fader


bilateral


models


1986


(except


assume


monopoly


paper


negotiations


single


McAlister


to be


buyer


, Bazerman,


occurring


a single


seller)


However,


reality,


most


common


occurrence


existence


retailers


manufacturers


most


dealers


dealing


with


retailers


multiple


carrying


dealers


goods


more


than


one


manufacturer


. In


a retailing


situation,


often


results


in negotiations


between


one


retailer


multiple


vendors


.To


capture


this


bargaining


characteristic,


both


laboratory


experiments


field


studies


need


take


into


account


comparison


level


alternatives


available


retailer


obtaining


In a field


information


from


study


this


retailer


would

on the


entail


either

vendors


being


considered


supply


a particular


merchandise


their


offers


or capturing


effects


multiple


vendors


(through


constructs


such


dependence


power


imbalance)


negotiation


strategy.


In a laboratory


experiment,


this


indicates


use


multiple


vendors


e bargaining










McAlister,


Bazerman,


and Fader


(1986)


However,


the notion of


multiple sellers and buyers was


introduced


this


paper


as a


manipulation of


should


from


the power


to understand


the entire set of


imbalance.


the impact


vendors being


Future experiments


of competitive offers


considered by the


retailer.


relationships between


individuals and


their


organization.


An issue


in distribution channels which has been debated


extensively


organizational


the use of key informants

characteristics. Phillips


capturing


(1981)


indicates


that many of


the paradigms used in distribution channels


attempt


to explain and


predict


the behavior


of organizations


or organizational


subunits and not


individuals.


According


him,


since organizational


characteristics are quite different


from individual


characteristics,


the notion


of key


informant


reports


as valid


indicators of


organizational


characteristics


is questionable.


One approach suggested by


Phillips


(1981)


would be


to use


organization


informants at different levels


to capture organizational


level


in an


constructs.


alternative approach is


to specify the levels at which


constructs operate.


example,


an important construct which


is used in


this dissertation


trust.


Trust can be specified


either


c-a -


an individual


1 evel


or at an organizational


level.


1










trust


vendor


representative


organization.


contrast,


organizational


trust


may


captured


through


reputation


construct


where


inputs


from


multiple


informants


both


from


within


organization


outside


organization


are


obtained.


This


suggests


that


there


need


distribution


channel


research


to clearly


specify


constructs


levels


at which


they


operate


then


develop


appropriate


measures.


Importance


Continuing


Relationships


focus


this


dissertation


on negotiations


between


channel


members


having


a continuing


relationship


retail


environment.


Retailers


past,


have


tended


concentrate


on short


-term


problems


mainly


because


intense


daily


activity.


considerably


due


However,


to greater


retail


intertype


environment


changed


competition


Wal-


Mart


vs.


Eckerds


on pharmaceutical


products)


, growth


vertical


marketing


systems


, changes


in technology


consumer


needs,


acce


leration


institutional


life


cycles


(Stern


-Ansary


1988


This


change


in retailing


environment has 1

strategic planing


to a greater


. An


important


emphasis


aspect


on long


-range


strategic


planning


to develop


a sustainable


competitive


advantage


which


can










operations


external


Efficient


such


inventory


relationship


external


relationships


with


vendors.


sustainable


with


operations


immediate


In other


competitive


words


advantage


distribution


suppliers

involve d


management)


customers.


developing


environment


, a key


: the


factor


is strong


strong


customers,


developing


vendor


relations.


Strong


vendor


relations


can


result


a long


-term


advantage


in many


ways


.Two


major


ways


a retailer


can


achieve


long


exc


-term


advantage


lusively


them


is by


getting


private


brand)


merchandise


or developing


made


a strong


relationship


with


vendo r


such


that


vendor


will


sell


exclusively


them


(exclusivity)


Long


-term


vendor


relationships


have


other


advantages


such


as deli


very


items


which


are


under


short


supply


haring


of market


information


preference


with


respect


to discounted


merchandise.


essence,


long


-term


relationships


provide


retailer


with


several


different


mechanisms


obtaining


sustainable


competitive


advantage.


However


relationships


in spite


traditional


obvious a

approach


advantages


in retailing


long

has


-term

been


adversarial


approach


Shapiro


1985)


, where


vendors


are


pitted


against


each


other


to obtain


best


possible


deal.


Such


an approach


advantageous


only


short


-run











Negotiations


Continuing


Relationships


main


thrust


negotiation


research


social


psychology


game


theory


until


now


been


to develop


models


which


explain


process


outcomes


negotiations


between


parties


a single


period


. These


single


period


or static


models


take


into


consideration


past


behavior


future


anticipated


behaviors


parties.


This


narrow


focus


negotiation


researchers


both


social


psychology


game


theory


stems


from


assumption


that


negotiation


occurs


between


parties


have


continuing


relationship.


As a result,


application


most


negotiation


research


areas


such


as manufacturer


distributor


or retailer-vendor


relationships


which


are


dominated


continuing


or long


-term


relationships


suspect.


To clarify


relationship


between


this


difference,


a consumer


us consider


a dealer


negotiating


sale


a car


.The


relationship


between


exists


until


a sale


is consummated


assuming


that


no fraudulent


activity


occurred


deal.


dealer


buyer


are


concerned


fashion


future


with


except


sales


future


when


.In


most s


or past


dealer


relationships


expects


Ltuations,


in any


goodwill


bargaining


explicit


to create


occurs










distributor

DuPont, a m


or a vendor


manufacturer


retailer


consumer


is relatively


industrial


permanent.


goods


calls


this


relationship


with


dealers


a "marketing


partnership


" The


characteristic


this


relati


onship


according


to DuPont,


desire


to seek


permanence


committed


relationship


with


dealer


Toys


' Us


leading


retailer


relationship


with


in toys


indicates


vendor


that


is essential


a strong

to developing


sustainable

relationship


competitive


advantage


expectation


. The

that


empha


such


relationship


will


continue


grow


attractive


compared


their


competitors.


example


difference

conceptual


dissertation


discussed


focus


model


above


previous


presented


is concerned


tries


to bring


negotiation


this


with


research


dissertation.


negotiation


between


This


retailers


vendors


situation,


have


continuing


researcher


relationships.


to focus


this


on antecedents


which


determine


long


-term


orientation


channel


members


effect


such


orientation


eventual


outcomes.


This


expand


focus


negotiation


research


from


restricted


emphasis


on current


strategies


outcomes


broader


view


of negotiation


which


considers


both


past











Organization of


the dissertation


This dissertation comprises of


six chapters.


A brief


description


of each chapter


is provided below.


Chapter


introduces


the need for


research


negotiations


between parties having a continuing


relationship.


seen in


this chapter,


the current


research


in negotiation views negotiation between parties as discrete


without any effect of past or


future of


an ongoing


relationship


Chapter


is a review of


research done


negotiations and continuing


in detail


relationships.


the characteristics of


This chapter


short-term and


looks


long-term


relationships,


the notion of


interorganizational


trust,


interpersonal and


the conceptualization of power,


research on future expectations and dissatisfaction with


outcomes.


Chapter


dissertation

that affect


3 describes


The conceptual


the nature of


the conceptual model


framework identifies constructs


interactions between retailers and


vendors


involved


in a continuing


relationship.


this


framework, a

motivational


set of


antecedent constructs affects


orientation of


the channel member


resulting










Chapter 4 c

dissertation. Th

collecting data,


describes


the methodology used


is chapter deals with

the data collection


the setting


process


the

for


, the measures


used,


the method of


analysis.


Chapter


focuses on


results obtained


from


analysis of


data


collected


this dissertation.


This


chapter describes


individual


relationships between


constructs


that are significant


possible reasons


some


and also


insignificant


speculates on


results.


Chapter


provides a discussion of


the results and a


brief


summary of


the significance of


this dissertation.


This


chapter


also mentions possible


future avenues of


research in


negotiations between continuing


channel members.

















CHAPTER


REVIEW


OF THE LITERATURE


Overview


Research


investigating


different


forms


exchange


mainly


emerged


from


economics


erature


dealing


with


vertical


integration


(Macneil


1978


issues


which


(Williamson


focused


1975


on contractual


contract


obligations


long


-term


relationships


This


chapter


-provides


an overview


various


streams


research


focussing


development


long


-term


relationships


, various


antecedents


long


-term


relationships,


consequences


key


long


characterist


-term


iCS


relationships


finally,


on behavior


channel


partners


This


chapter


emphasizes


four


factors


which


determine


relationships1:


existence


trust,


development


power,


long


satisfaction,


-term


expectations


future


interactions.


Definition


Various


Forms


of Exchange


Research


on interorganizational


relationships


mainly


fn l riic ls


n ~twn f


nrrmn


I--ir Ii n I It-


ma rkest


h i !Arrch i cal


roji L


1J I










competitive


markets.


Using


this


approach,


retailers


primarily


buy


on price,


use


multiple


sources


supply


to obtain


best


possible


deal


from


vendor


. Often,


this


involves


switching


suppliers


over


time


using


competition


among


vendors


to obtain


best


outcome.


A market


exchange


inherently


short


-term


oriented


because


focuses


on outcomes


from


one


transaction.


Another


been


form


used


of exchange


literature


known


as hierarchical


to denote


exchanges


exchange


between


vertical


integrated


units


(Williamson


1975) .


This


results


retail


have


buyers


merchandise


working

produced


within

rather


their

than


own


organization


buying


from


independent


vendor


market


Both


these


exchanges


form


opposite


ends


of a continuum.


An intermediary


form


exchange


relational


exchange


Spekman,


(Macneil


O'Neal


1979


Dwyer


1988) .


, Schurr


Relational


1986


exchanges


Frazier,


occur


when


independent


buyers


sellers


develop


relationships


with


long


-term


orientation


(Spekman


Johnston


1986).


relational


exchange e


advantages


associated


with


both


market


exchange


a hierarchical


exchange.


Specifically,


relational


economies


exchange


obtained


from


achieves

dealing


benefits


with


through


independent


scale

specialists.










relationships


While


relational


exchanges


provide


significant


benefits


to both


parties,


they


are


fragile


absence


a strong


governing


mechanism


such


marketplace


bureaucracy.


Characteristics


of Market


Relational


Exchanges


discussion


above


pointed


three


different


approaches


in retailer-vendor


relationships


First,


a market


exchange


where


focus


is on current


transactions,


second


relational


exchange e


where


focus


is on future


transactions,


third


a hierarchical


exchange


where


focus


is on future


transactions


through


bureaucratic


control.


These


appro


aches


highlight


character


stics


which


are


quite


different


from


each


other


. The


characteristics


two


approaches


(market


relational)


are


discussed


this


section


(hierarchical


exchange


particularly


relevant


this


context).


Frame


for


Exchanges


Market


exchanges


tend


to viewed


"discrete


transactions "


with


parties


having


very


little


commitment


each


other


. This


leads


a channel


member


to focus


on the


current


transaction.


A relational


exchange


characterized


a higher


level


functional


interdependence


where


shared


Time










transactions


future


implications


of a relationship


are


brought


future


present


transactions.


incorporate


future


thus


disallowing


comparison,


transactions


consideration


relational


present.


exchanges


According


Macneil


1980


, the


present


relational


transactions


used


planning


preparing


future


arrived.


Goal


IncomDatibilitv


Goal


incompatibility


a relationship


degree


which


a set


specific


goals


objectives


one


party


are


ompatible


those


other


party


(Stern


Heskett


1969


Studies


channel


management


have


focused


on the


effect


goal


incompatibility


on channel


conflict


. In


their


study


franchised


industrial


installation


distribution


network


manufacturer,


a large


Eliashberg


Michie


1984


found


different


sets


of goals


franchisor


franchisee.


Even


preference


orderings


on different


goals


franchisor


franchisee


were


different.


Anderson


Weitz


(1989


found


that


goal


compatibility


among


channel


members


trust


industrial


a desire


sector


to continue


to higher


relationship


levels


a long


time. In

evidence


spite


regarding


these

the


studies,


level


there

goal i


is no systematic


ncompatibility










values


trust


two -way


communication


, one


would


expect


higher


level


goal


compatibility


between


parties.


Transaction


Costs


According


transaction


cost


framework


(Williamson


1979,


1981


firms


strive


economize


their


transaction


costs


Transaction


costs


are


costs


assoc


lated


with


writing


negotiating


implementing


a contract


between


two


part


ies.


In market


exchanges


which


are


based


on disc


rete


transactions,


transaction


screte


costs


transactions


are


not


to several


envisage


reasons


future


First,


transactions


hence


no contracts


are


need


ed for


enforcement


contingencies


at a future


point


time.


Second,


discrete


transactions


depend


on the


efficiency


market


system


hence


have


little


transaction


specific


investments.


result,


both


parties


can


change


partners


without


worrying


about


investments


idiosyncratic


relationship.


Third


occas


screte


ionally


transactions


law.


are


easier


enforced


to monitor


soc


such


norms


exchanges


because


relatively


level


ambiguity


objects


exchange.


In contrast,


relational


exchanges


encourage


development


specialized


investments


which


are


idiosyncratic


particular


transaction


and,


hence,










opportuni

opportuni


stic


behavior

behaviors


other


, part


have


party.


To reduce


to write


contracts


ch indicate

s increases


how

the


future


contingenci


transaction


specific


would

costs.


resolved.


An alternative


mechanism


used


channel


member


s in


relational


exchanges


reduce


opportuni


behavior


reduce


transaction


specific


costs


to develop


a high


deg r


mutual


trust


This


would


obviate


need


contingent


claims


contract


between


parties


An empirical


ssue


that


been


addressed


so far


literature


is whether


relational


exchanges


are


characterized


high


transaction


costs


Transaction


Specific


Investments


According


to Frazier


et al


1988)


relational


exchanges


invol


high


level


specialized


investments


in human


phys


ical


assets


. Often


, in


relational


exchanges


such


as Just


In-Time


assets


JIT)


such


exchanges


as a new


, specialized


plant


inve


next


stment


Original


in durabi


Equipment


Manufactur


OEM


new


warehouse


more


delivery


vehi


are


essential


ose


functioning


OEM


supplier


.In


many


cases


, these


specialized


investments


cannot


transferred


or redeployed


elsewhere


. Therefore


these


transaction


specific


investments


raise


eve










parties


to dedicate


resources


partnership.


Ford,


which


a champion


exchanges


, makes


substantial


investment


suppliers


Improve


their


productivity


effi


ciency.


CAD/CAM


Often,


systems


Ford


to de


helped


sign


many


suppliers


their


install


component


new


parts


instead


providing


area


specifications


interpersonal


relationships


supplier.


, close


relationships


have


been


found


to have


a higher


level


irretrievable


investment,


1.e.,


investments


in time,


energy,


emotional


costs


, self-disclosures


, and


money


(Kelly


1978)


Rusbult


1980


investment


model


indicates


that


relationships


which


have


a higher


level


investment


may


have


greater


commitment,


i.e.


a sense


of loyalty


partner,


an expectation


continuity


relationship,


a willingness


to sacrifice


short


-term


outcomes


order


to strengthen


relationship.


retailing


environment


there


seems


to be


some


evidence


exchanges


that


have


retailers


a high


degree


vendors


have


transaction


relational


specific


investment.


JC Penney


, a leading


department


store


chain,


developed


computerized


procurement


inventory


systems


along


with


their


long


-term


suppliers


to minimize


inventory


costs.










mainly


because


future


contingencies


exist


exchange


1980) .


is a simple


other


, monetiz


hand,


able


relational


economic


exchange


exchanges


focus


Macneil


on the


substance


of planning


only


initial


period


main


focus


on planning


structure


process


exchange


rules


regulations


conduct


exchange


future

planning


periods

a for s


. The


specific


parties

issues


exchange e


occurring


realize


future


that


IS COS


difficult


hence


focus


planning


is on


establishing


self


-regulatory


mechanisms


These


mechanisms


establi


sh approaches


to solve


problems


in a mutually


beneficial


way


when


gaps


exist


planning


process.


Partners


in a relational


exchange


are


likely


to share


future


plans


take


into


consideration


potential


outcomes


their


partners


. Partners


in a relational


exc


change


are


more


likely


to share


information


about


technological


advances


new


innovations,


thus


identify


opportunities


future


Level


plan


Risk


functional


interdependence


high


level


transaction


specific


investments,


relational


exchanges


are


perceived


as relatively


high


sk by


parties


exchange.


In JIT


exchanges


which


are


the


extreme










In contrast


risk

the


transactions


associated


parties


with


depend


discrete

on efficiencies


competitive


markets.


In fact


multiple


suppliers


are


often


rule,


indicating


a spread


across


suppliers.


Consequences


Relational


Exchanges


In spite


of lack


empirical


evidence


regarding


consequences


relational


or long


-term


exchange


there


seems


to be


some


evidence


based


on actual


relationships


that


relational


exchanges


improve


profitability


exc


changes.


This


section


focuses


on the


effect


long


-term


relationships


on issues


discussed


during


exchange,


communication


bargaining


strategies


employed.


Focus


Exchange


Theoretical


research


area


industrial


purchasing


(Frazier


, Spekman,


O'Neal


1988


; Spekman


1988


suggests


that


focus


exchange


in a market


exchange


price


a product.


original


equipment


manufacturer


(OEM)


relies


on a large


number


suppliers


who


can


played


against


each


other


to obtain


best


sible


price.


buyer


considers


potential


sources


as homogeneous,


therefore


risk


associated


with


switching


from


one


supplier


to another


very


low.


This


results


a low


degree










relational


exchanges.


Salmond


(1987)


argues


that


relational


exchanges develop between OEMs


and suppliers when suppliers


offer


customized-differentiated parts


differentiation provides


the core product and


the OEMs an


to the OEM.


incentive


the value added services


This

focus


rather


than


price of


the product alone.


focus


such an


exchange


no longer on


the price of


a product but on cost containment,


value analysis,


An issue which needs


joint product development


to be addressed


(Spekman


empirically


1988).


whether


focus of


exchange on


value added


services and


core


product


is a direct consequence of


differentiated


product


offered by the supplier.

Communication


Communication between


rties


relationship can be discussed


in an exchange


terms of


frequency and


content of


communication.


Macneil


(1978,


1980)


indicates


that


relational


transactions are characterized by extensive,


deep,


informal


or formal


communication.


In contrast,


communication


between parties


in a market


exchange characterized by


discrete


transactions are


limited and


formal.


In an industrial


purchasing


context,


Frazier


et al.


(1988)


argue


that


communication between OEMs and suppliers










more


product


Often,


frequently


development,


OEMs


on issues


value


suppliers


such


analysis


work


as cost


, and


closely


containment,


joint


to define


new


designs.


quality


standards


devise


ways


means


to implement


states


tical


quality


control


procedures


This


increased


level


interdependence


generates


intense,


informal,


frequent


communications


between


part


In channel


management


, most


literature


deals


with


communication


between


manufacturers


distributors


Stern


-Ansary


1988)


indi


cate


that


communication


plays


important


role


effi


ciency


a channel


system


performance.


According


to Teas


Sibley


(1980)


communication


reduces


role


ambiguity


thus


improves


channel

that in


performance.


tense


Anderson


communication


occurs


Weitz (

between


1989


firms


have


found


having


high


stakes


greater


trust.


As relational


exchanges


result


high


stakes


to the


high


level


transaction


specific


investment


in the


relationship


, communication,


both


intense


informal,


can


expected


between


channel


members


relational


exchange.


Long


-term


relationships


area


interpersonal


relationships


are


also


characterized


increasing


interaction,


greater


openness


longer


periods


time


, and


es.










the area


of bargaining and negotiations,


several


studies have


looked at


the antecedents of


communication,


especially message sending behaviors


(Pruitt


1981)


Although


most


bargaining


studies


have looked at


relationships


from a


static or

the effect


a discrete viewpoint,

of anticipation of f


a few studies


futuree


have


interactions


looked at

on the


behavior


of bargainers


(see


section on expectation


future


interactions


a more detailed discussion).


These studies


indicate


that anticipation of


future


interactions


leads


cooperative behaviors


(Ben-Yoav and Pruitt


1984)


when


other party is


seen as cooperative.


These cooperative


behaviors


are often in


the form of


cooperative communication


where one's goals,


priorities,


and values are conveyed


other


party.


Baraainina


Macneil


(1978)


indicates


that bargaining


in a discrete


transaction focuses mainly on


the price of


a product.


This


focus on price leads


"distributive" bargaining,


which


focuses on how the available benefits are


to be distributed.


In contrast,


in relational


transactions,


both parties


strive


for

This


"joint creative effort

is done by extending


or mutually beneficial


the bargaining horizon


outcomes.

include


future periods of


time.










units)


inside


the boundaries of


a group of


companies


committed


to long-term cooperation.


He argues


that


negotiations


in domesticated markets


focus on structural


issues,


and not on


transactional


focus on specific


transaction)


or contractual


(time-bound agreements)


issues.


These structural negotiations


are strategic as


they apply to


form and


intensity of


long


-term relations.


Arndt


(1979)


Dwyer,


Schurr,


and Oh


(1986)


make a case for


increased


research in


the area of


negotiations


long-term


relationships


Most of


studies


Soc


psychology and game


theory


have


focused on discrete negotiations


(focus on specific


transactions).


A few studies


in social


psychology have


attempted


to capture


long-term orientation of


bargainer


by manipulating


the presence or


absence of


future


interactions with


the other


bargainer


(Ben-Yoav and Pruitt


1984;


Gruder


1971;


Shapiro


1975;


Marlowe,


Gergen,


and Doob


1966;


Roering,


Slusher,


and Schooler


1975


. Bargainers


in the


presence of


future interactions were


told


that


they would be


in a


cooperative


task with


their


current bargainer


the end


the bargaining


session while subjects


the absence of


future interaction condition were not


given such


instructions.


It was


found


that bargainers who anticipated










negotiator


regarding


length


relationship,


affects


negotiation


behaviors


tactics.


Factors


Governina


Relational


Exchanaes


There


are


several


factors


which


affect


emergence


development


relational


or long


-term


exchanges


. This


dissertation


focuses


on four


such


elements:


trust


between


parties


exchange,


extent


satisfaction


/dissatis

future in


faction


between


teractions,


parties,


degree


expectations


power


about


imbalance


between


parties


Each


these


factors


discussed


depth


following


sections.


Trust


Goliembiewski


McConkie


(1975)


indicate


that


there


no single


variable


that


so thoroughly


influences


interpersonal


group


behavior


trust


. The


burgeoning


literature


in social


psychology


marketing


emphasizes


important


point


: trust


acts


a salient


factor


determining


spirit

same 1


character


literature


indicate


a huge

s that


range

trust


relationships.


is critical


personal


growth


development


as well


task


performance.


some


observers


, trust


seems


to be


an edifice











important t


1969)


component of


. Although


labor


this does not


relations and bargaining


exhaust


(Nigro,


the entire catalog


applications,


it does offer


a cursory glimpse of


centrality


trust


in much social behavior.


Meaning of Trust


In social


parlance,


trust and


synonyms have been


used


so often with such


varied


intentions


that


vagueness


apparent


the multiple meanings given


trust.


For working


purposes,


at least,


in common


usage:


Trust
person
Trust


implies


reliance on


, or confidence


some event,


thing.


reflects an expectations about outcomes


perceptions and life experiences.
Trust indicates a charge or duty


imposed


based on


faith


confidence as a condition of


(Webster's New


International


some relationship.
Dictionary)


these definitions


imply


some expectations of


some


kind--but


the different kinds


expectations are not clearly


distinguished


(Barber


1983) .


Following


Barber


(1983),


"Expectations are


the meanings actors


attribute


themselves


others as


they make cho


ices


about which actions and


reactions


are rationally effective and


emotionally and


morally appropriate"


(page


The concept of


expectations


a generalized


one


and as a


result


only those expectations


which are


related


fundamental meanings of


trust are


* ,, s.,, 1 4 aaa q


,


LLrrr rrrr r.L~L


rlLA










.The


expectation


technically


competent


role


performance


from


those


involved


in social


relationships


systems.


expectation


that


partners


in interaction


will


carry


their


fiduciary


obligations


responsibilities


first


expectation


most


general


one


which


humans


social


internal


ze


order


pers


istence


realization.


natural


Luhmann


1980


moral


points


that


such


a generalized


trust


helps


reducing


complexity


social


life


.One


does


worry


about


falling


down


or a person


being


slapped


others


, simply


because


this


generalized


trust


. Several


social


psychologists


generalized


have


highlighted


expectation


or trust


importance


as an aid


this


to general


development


learning


abilities


individuals


Gibb


1964;


Rotter


1971


Against


this


backdrop


of generalized


expectancy,


second


second


third


expectations


definition


refers


have


to the


very


specific


meaning


meanings.


trust


as the


expectation


technically


competent


role


performance.


competent


performance


expected


may


relate


to expert


knowledge


, technical


facility


or everyday


performance


individual.


In a retailing


context,


a vendor


who


delivers


goods


on time


may


be considered


trustworthy,


as a result










monitored


very


easily.


However,


when


situations


arise


where


such


performances


cannot


be monitored,


trust


becomes


extremely


powerful


medium


which


directs


exchange


relation


ships.


A fiduciary


obligation


placed


vendor


or retailer


to perform


in a way


that


does


not


take


advantage


trust


imposed


on them.


second


trust


expectation


bargaining


seems


literature


to reflect the

(Pruitt 1981).


focus

Trust


expectancy


that


a person'


word,


promise


reliable


that


person


competent


will


manner


fulfill


necessary


in an exchange


obligations


relationship


in a


competent


role


performance).


Lindskold


1978


refers


this


expectation


"objective


credibility.


However


obligation


, the


seems


third


to be


definition


a key


trust


element


as a fiduciary


conceptualization


trust.


person


may


not


always


act


way


s/he


says


s/he


will


will


trusted


actions


are


considered


benevolent


partner


. Lindskold


1978)


refers


this


an attribution


benevolence


or nonmanipulativeness


. In


other


words,


a person


is perc


eived


as someone


cares


about


outcomes


others


nonmanipulative,


s/he


likely


to be


trusted.


Swan


Nolan


1985)


define


trust


in terms










component


indicates


the person's subjective probability about


truthfulness


an object person'


statements.


Intentions


reflect


the person's plans


to behave


in a


trusting


mistrusting way towards


the object person.


Though


their


definition of


trust


is directly based


on the


tripartite model


of attitude,


similar


the definitions proposed by


Barber


(1983)


Lindskold


(1978)


the definitions


indicate


that


there


is belief


element which


is based


objective assessment of


an object person's


truthfulness


and an affective element which is


subjective and based on


attributions


regarding the object


person'


behavior


past.


Levels of


Trust


Along with different expectations,


one has


to be


exacting


in specifying


the particular


social


relationship or


social


system of


reference


(Barber


1975) .


What


regarded as


competence or fiduciary responsibility between a retail buyer


vendor's


representative may be quite different


from the


expectations about each other's organization.


In other words,


imperative that


the level


at which


trust operates


should be clearly specified.


In organizational


trust may operate at an interpersonal


level


settings,


or organizational


level


or both.


In certain


exchange relationships,






32



Trust and Lona-Term Relationshios


Trust plays an important


role


the development of


long-term relationships.


the most basic


level,


one party


to undertake some actions


before


the other


party and


thus


must


rely on


the other party to honor


its commitments.


Thus,


any type of


coordinative action by one party


in a


relationship


in a


is open


relationship develop


to exploitation.


the confidence


Through


that


trust

short


, parties

-term


inequities


relationship will be corrected and will


lead


to long-term benefits


(Kronman


1985).


Institutional


economists'


are concerned with market


failure due


to opportunism


(Williamson


1975) .


The greatest


potential


such opportunistic behavior


relationships where


in long-term


the market based discipline is


removed or


reduced by a


lack of


large numbers of


competitive entities.


In such a noncompetitive situation,


the hazards of


opportunistic behavior


exchange


is greater because


termination of


relationship cannot be easily achieved.


In a


noncompetitive situation,


opportunistic tendencies can


cripple efficient


profit


exchange because


the party indulging


it often results


in such behaviors.


in higher


Williamson


argues


that hazards of


opportunism can be reduced by the use


of more administratively coordinated structures


to govern










undesirable behavior


such as opportunism.


Following


this


suggestion,


one may argue


that hazards of


opportunistic


behavior


in long-term relationships can be mitigated or


removed


a strong cooperative attitude such


as trust


prevails.


Frazier,


Spekman,


and O'Neal


(1988)


indicate


that a key


factor which contributes


success


committed long-


term relationships


such


the JIT


exchanges


is the


level


trust between


the supplier


the OEM.


Trust


extremely


important because of


the high


transaction specific


investments committed


relationship.


In fact,


Frazier


et al.


argue


that a high level


trust may exist even before


the supplier


and OEM initiate


the JIT


exchange.


Trust is


enhanced as


tangible evidence of


personal


integrity


accumulates,


promises are upheld and


opportunistic behaviors


are


forgone.


Consequences of Trust


Trust leads


to hiah-risk


coordinative behavior.


Coordinative behavior between parties


in a exchange


relationship


is necessary for


reaching mutually acceptable


agreements


(Pruitt


1981


Coordinative behavior


can be


classified as high-risk,


moderate-risk,


low-risk


depending


on the amount of


risk


involved


in various actions










action would be a


large concession


that


seeks a reciprocal


concession,


a proposal


compromise,


a unilateral


tension-


reducing ac

priorities.


;tion,


or statements about one's motives and


Normally,


such high-risk coordinative actions


leave a


party open


image


loss


(perception of


the bargainer


as a person willing


to concede more


than necessary)


, position


loss


their


a pos


ition


initial


in which a bargainers


position),


information loss


cannot move back


(bargainer's


statements about values,

other party for devising


loss of


aiming


priorities,


and limits used by the


threats or positional


opportunity for competitive behavior


at cooperation will be


commitments)


(bargainer


inconsistent with competitive


behavior


at a later


stage).


Trust


encourages coordinative


actions by


reducing


the dangers of


four


types


losses


described above.


Position loss


reduced because


the other


party


is expected


to concede in return.


Image


loss


reduced


the behavior will not simply strengthen


the other party's


determination.


Information loss


reduced as


the other party


is not expected


to misuse


information.


Finally,


loss of


competitive behavior does not


play an


important


role as


intention is


Thus


to coordinate with


trust


the other party.


encourages high-risk coordinate action by


reducing th


e dangers of


image loss,


position loss,










Trust


leads


to effective


problem


solvina


. In


spite


sparse


evidence,


trust


seems


to lead


to effective


problem


solving


. In


low-trust


groups


, Zand


1972


notes


"interpersonal


perceptions


relationships


problem.


interfere


Energy


with


creativity


distort


are


diverted


from


finding


comprehensive


realistic


solutions


members


use


problem


as an instrument


to minimize


vulnerability

demonstrated


" Using


that


a quasi


subjects


-experimental


exposed


design,


instructions


Zand

including


high


versus


levels


trust


differ


significantly


terms


their


behavior


. Specifically


, high


trust


more


open


exchange


relevant


ideas


feelings,


greater


clarification


goals


problems


more


extensive


search


alternative


courses


action,


increased


sharing


influence


among


participants


, greater


satisfaction


among


participants


about


their


problem


solving


efforts


, greater


motivation


to implement


deci


ions,


a feeling


interpersonal


enhanced


closeness


problem


within


solving


groups.


a group.


these


Interestingly,


behaviors


Zand


results


were


same


when


data


was


gathered


independent


ways


: self-reports


from


subjects


, and


reports


from


observers


group


performance


who


inkling


experimental


conditions


. In


other


studies,


(1970










Further


suspicion


groups


were


given


more


threats


lies


than


sharing


information.


Trust


leads


to cooperative


behavior.


A number


researchers

bargaining


have


found


behavior


systematic rel

an individual


ationship


s predi


between


position


trust


others


Based


on a number


studi


appears


that


trusting


bargainers


behave


more


cooperatively


than


those


are


ess


trusting


. Deutsch


1962)


indicates


that


when


indi


vidual s


choose


to cooperate,


they


essentially


place


their


fate


hands


others


This


a basic


trust.


Gibb


(1964


proposes


that


concerns


controlling


others


becomes


relatively


minor


trusting


individuals.


Such


condition


facilitates


cooperation.


Tedeschi,


Hiester,


Gahagan


1969


Schl enker


, Helm,


Tedeschi


(1973


found


that


individuals


trusted


others


behaved


more


cooperati


were


vely


in trust.


Prisoner


Deutsch


s Dilemma


(1960)


game


also


than


found


those


support


trust


as a facilitator


cooperative


behavior


. He


found


that


subjects


more


who


cooperatively


goals


than


cooperative


subj ects


orientation


a goal


behaved


being


competitive.


IKimmel


et al.


1980


found


that


under


high


aspirations,


high


trust


produced


cooperative


behavior


form


direct


information


exc


change


while


trust


produced










Kimmel


et al.


study)


high


trust led


to higher


level


agreements,


fewer unreciprocated concessions,


distributive messages compared


to a


fewer


low trust condition.


In summary,


behavior


low trust


it produces evar


communications which concea.


is an antecedent of

sive, complaint, or

L the true attitudes


distributive


aggressive

(Mellinger


1959)


whereas high


especially


trust

form of


foste

self


rs


integrative behavior,


-disclosures about needs and


priorities


(Kimmel


et al.


1980) .


Thus,


based


on the empirical


evidence one can


conclude


that


trust


results


in cooperative


behavior.


For more


than


two decades


the phenomena of


power


channels


distribution has been given regular


empirical


attention


the marketing


literature.


Stern and El-Ansary


(1988


indicate


that a major


function


of power


to specify


roles of


the channel members


effective coordination


between parties.


Meanina of


Power


Based on


the numerous definitions of


power


, Stern and


El-Ansary


(1988)


conclude


that


power


the ability to get


another channel member


to do what


the latter would not have










increase


in the


probability


enacting


a behavior


after


A has


made


an intervention,


compared


with


probability


enacting


behavior


absence


s intervention.


In a marketing


context,


according to


El-Ansary


Stern


1972):


nme power
control d
strategy
different


to qualify


a channel


member


decision variables
of another member


level


as power,


stribution
it should


his/her


ability


marketing


a given


.For


channel


this


different


control


from


the
over


influenced


member


own- marketing


original
strategy.


level


control


(page


above


nature


definition


power


will


been


be used


greatly


this


discussion.


illuminated


works


Emerson


(1962)


French


Raven


1959).


Emerson


focused


relationship


between


power


dependence.


Power


viewed


from


viewpoint,


extent


to which


channel


members


depend


on one


another


.The


more


highly


dependent


A is


on B,


more


power


B has


over


According


to Emerson


, the


dependence


on A is


directly

mediated


proportional


to B


inversel


s motivational

y proportional


investment


goals


availability


those


goals


to B outside


A-B relationship


Another


approach


to power-dependency


issue


to view


dependency

exchange t


from


heory


a social


rests


exchange


two


perspective.


important


constructs


social


: comparison


S S S S -


a


i .


1


q .


h










present


experience


their


knowledge


firms


similar


themselves


compared


.The


against


outcomes


this


obtained


standard,


from


determine


a relationship,


attractiveness


relationship.


comparison


level


alternate


lives


alt)


contrast,


average


quality


outcomes


channel


members


can


expect


from


best


alternative


(resource


vendor)


their


present


exchange


relationship.


As such,


comparison


level


alternatives


represents


lowest


level


outcomes


a channel


member


will


accept


still


remain


relationship


.The


level


outcomes


from


current


relationship


compared


comparison


level


alternatives


.determines


level


dependency


one


party


another.


A much


broader


conceptualization


power


dependency


is provided


Heide


John


1988) .


According


Heide


John


(1988) ,


a channel


member


A is


dependent


channel


member


B if


Channel


member


A considers


outcomes


from


relationship


as highly


important.


. The


magnitude


channel


member


s business


with


B is


very


high.


Channel


member


outcome


from


relationship


much


higher


than


best


other


alternative.


There


are


fewer


alternative


sources


exchange


available










Channel


member


A has


invested


high


transaction


specific


assets


in the


relationship


Thus


more


dependent


channel


member


A is


on B based


these


sources


dependence


, greater


power


French


Raven


(1959


added


more


specificity


notion


power


identifying


sources


or bases


power.


According


to French


Raven


1959) ,


sources


power


over


are


based


s perception


that


A has


ability


to mediate


rewards


s perception


that


A has


ability


to mediate


punishments


perception


that


A has


legitimate


right


prescribe


behavior


identification


with


s perception


that


A has


some


special


knowledge


expertness.


These


power


sources


have


been


designated


reward,


coercive,


legitimate,


referent,


expert


power


bases


. The


greater


sources


power


available


to a channel


member,


greater


power


channel


member.


Gaski


1984)


pointed


that


though


there


considerable


amount


consensus


among


marketing


researchers


A-I- A. .- I t I A-t~ -- -A .


L I


1


_ I


L


I


'I










whereas


exercised


power


refers


actual


use


such


power


to alter


behavior


channel


members.


Consecauences


Power:


Some


Experimental


Results


Prisoner


s Dilemma


Paradiam.


effect


power


asymmetry


on bargaining


PD paradigm


varying


effectiveness


actual


been


assessed


or perceived


status


parties


or payoff


or by


matrices


varying


. In


experimental


manipulation


reward


power


structure


through


status


variation,


power


each


party


believes


he/she


can


entitled


to exerci


varied.


In the


manipulation


power


through


reward


allocation,


initial


allocation


resources


among


parties


varied.


Irrespective


way


power


between


parties


manipulated,


general


conclusion


effectiveness


that


. In


power


most


asymmetry


games,


affects


bargaining


cooperative


behavior


measured


number


cooperative


moves


made


party.


Status


variations


: Rekosh


Feigenbaum


(1966)


Faley


Tedeschi


(1971)


manipulated


status


a PD


game


had


subjects


negotiate


again


an experimental


confederate.


Rekosh


cooperative


Feigenbaum


choices


1966)


with


found


greater


that


frequency


subjects


when


made


playing


against


a peer


(with


equal


power)


rather


than


a graduate


PD )










status


than


status;


rank


cadets


behaved


more


cooperatively when


other


person


was


a low


status


than


high


status


Thes e


studies


others


. Rubin


and


Brown


1975


provide


some


evidence


that


equal


power


bargainers


behave


more


cooperatively


(make


more


cooperative


moves


than


those


with


unequal


power.


Matrix


variation


: Most


studies


this


category


manipulate


these


power


experiment


varying


matrix


matrices


which


values


outcomes


game.


to both


players


outcomes


are


symmetrical


favored


one


were


player


contrasted


over


with


another


those


. In


which


general,


findings


these


studies


indicate


that


bargainers


with


equal


power


behave


more


cooperatively


(make


cooperative


moves


with


greater


frequency)


than


bargainers


having


unequal


power.


Reward


structure:


these


experiments


, power


was


manipulated


differentially


allocating


initial


resources


or control


over


experimental


situation.


Aranoff


Tede


schi


1968)


awarded


one


member


a pair


subjects


initial


advantage


, 50,


100,


points.


was


found


that


magnitude


frequency


mutually


subject


cooperative


s advantage


moves


increased,


decreased.


Acme- Bolt


truckina


came.


support


proposition


about


effect


power


also


been


obtained










gate


reflects


power


party


can


control


outcomes


other


party.


results


indicated


that


mean


joint


outcomes


bargaining


effectiveness


was


greater


when


bargain


ers


equal


power


or 2


gates)


than


unequal


power


gate


Bilateral


monooolv.


Komorita


Barnes


1969


tested


effects


power


in a bilateral


monopoly


paradigm


found


that


subj ec t


pairs


with


equal


power


reached


agreements


more


often,


required


fewer


trials


to do


made


larger


concessions


than


those


with


unequal


power


. Further


, numerous


other


studies


have


indicated


that


bargainers


with


high


power


relative


those


their


partner


tend


to behave


manipulatively


, and


exploitatively


, while


those


with


power


tend


to behave


submi


ssively


(see


Rubin


Brown


1975


studies


relating


to thi


In marketing


, a few


experiments


have


investigated


effect


power


asymmetry


on negotiation


process


outcomes.


earliest


experiment


was


a laboratory


imulation


manufacturer retailer


bargaining


Walker


1971) .


In this


experiment


, the


balanced


power


condition


negotiations


between


one


manufacturer


one


retailer


while


unbalanced

retailers.


power


Walker


condition

utilized


had

this


one


manufacturer


design


to study


and

the


two

effects










over


time


they


learned


where


a mutually


acceptable


agreement


was


likely


occur


adjusted


their


offers


that


section.


As a result,


they


required


fewer


bids


, tended


yield


less


profit,


communicated


less


frequently


in coming


terms.


Walker


not


however,


compare


processes


outcomes


bargaining


asymmetric


power


setting


with


bargaining


a balanced


structure.


Dwyer


Walker


(1981)


extended


this


design


compare


negotiation


process


outcomes


in a symmetrical


power


distribution


against


an asymmetrical


power


distribution.


They


concluded


that


bargainers


were


more


powerful


made


more


demanding


initial


bids,


yielded


less


from


their


initial


positions


, made


fewer


bids


to obtain


an acceptable


agreement,


sent


a larger


proportion


demanding


-threatening


messages,


made


higher


individual


profit


achieved


agreements


which


gave


total


them


disproportionately


profits


favorably


Further,


disposed


towards


larger


weak


their


share


bargainers


partners


their


were


were


group


ess


less


satisfied


with


their


performance


compared


to bargainers


equal


power


condition.


Another


study which


investigates


effects


symmetric


Fader


asymmetric


1986) .


power


power


is by


channel


McAlister,


members


Bazerman,


this










number


buyers


sellers,


while


other


markets


there


were


sellers


every


buyer-


a situation


power


imbalance


favor


buyer


Orthogonal


this


manipulation


power


, power


was


also


manipulated


number


transactions


each


channel


member


could


complete,


providing


a power


advantage


seller


. Thus,


one


market


provided


power


imbalance


in favor


seller,


other


favor


buyer


other


market


situations


represented


power


balanced


situations


. This


study


found


that


higher


power


channel


members


reached


more


profitable


agreements


than


lower


power


channel


members.


Further,


channel


members


with


higher


power


were


able


to reach


greater


overall


profitability


than


lower


power


channel


members


. This


experiment


also


showed


that


dyads


with


equal


power


reached


more


integrative


agreements


than


dyads


with


unbalanced


power.


This


experiment


found


support


most


conclusions


reached


Dwyer


Walker


(1981)


Game


theoretic


approaches.


A few marketing


studies


have


employed


utility


based


theories


prediction


outcomes


a variety


bargaining


situations


. The


most


prominent


among


them


been


use


Nash'


1950)


bargaining


solution


prediction


bargaining


outcomes


. Nash


s bargaining


solution


an axiomatically













differences


in outcomes


dyads


with


asymmetrical


power


compared


to dyads


with


symmetrical


power.


Consequences


Power:


Field


Studies


In spite


large


number


marketing


field


studies


focussing


on power


conflict,


many


studies


have


looked


consequences


power


. The


focus


most


channel


research


sources


been


power


on investigating


power


relationship


consequences


between


power.


a distributive


system


automobiles


Lusch


1976)


found


that


coercive


sources


power


increased


conflict


while


noncoercive


sources


power


decreased


conflict.


Wilkinson


1981)


reported


support


same


relationship


suggested


that


causal


direction


relationship


may


erroneous


. The


relationship


between


power


sati


sfaction


was


found


to be


dependent


on whether


power


was


exercised


or not.


Specifically,


exerc


ised


power


to lower


sati


sfaction


while


unexercised


power


to higher


sati


sfaction


channel


member


who


lower


power


(Gaski


Nevin


1985).


ExPectations


Future


Interactions


Several


studies


social


psychology


have


found


that


buyers


sellers


committed


to future


interactions


tend










beyond


immediate


transaction


may


imply


a greater


weighting


opponents


outcomes


than


a single


period


negotiation.


Meaning


Expectation


Future


Interactions


Expectations


future


interaction


simply


expectation


on the


part


bargainers


that


they


would


interact


with


their


opponent


at a future


point


time.


spite


some


simplicity


ambiguity


researchers


have


this


usage


used


construct


this


a slightly


there


construct.


different


seems


In fact,


construct


to be


some


called


expectation


cooperative


future


interaction


(Ben-Yoav


Pruitt


1984


. They


define


expectation


cooperative


future


interaction


anticipation


working


toward


common


goal


with


other


party


at a later


point


time.


should


noted


interaction


that


assumes


expectation


certain


level


cooperative


cooperativeness


future


trust


between


parties.


Although


studies


using


both


constructs


will


discussed


here,


is necessary


to keep


mind


that


expectations


cooperative


future


interactions


probably


function


high


expectations


future


interaction


high


trust.


Consequences


Expectations


Future


Interaction


A number


studies


seem


to suggest


that


expectation










that


game


would


continue


three


more


periods


. Half


subjects


partner,


while


were

e the


told

othe


that t

r half


hey would

were told


interact

that th


with


ey


same


would


interact


with


a different


partner


after


each


game


. They


found


that


subjects


expected


future


interactions


with


their


partner


moves


behaved


than


more


subjects


cooperatively


expect ted


(made


future


more


cooperative


interactions


with


different


partner.


In another


experiment


, Marlowe,


Gerg en,


Doob


1966


subjects


play


a 30


trial


game


. The


subjects


were


either


to expect


that


they would


meet


with


their


partner


after


game


or they


were


given


no such


expectation.


was


found


that


subj ec ts


anticipated


future


interactions


were


ess


exploitative


than


those


expect


to meet


other


partner


in future.


In direct


contrast,


a PD experiment


Swingle


1969)


found


subjects


who


expec t


future


interaction


behaved


more


cooperatively


than


subj ects


anticipated


future


interactions.


This


apparent


inconsi


stency


in results


was


resolved


an experiment


Gruder


1969)


In a bargaining


experiment,


subjects


to believe


tha t


other


bargainer


was


"fair


reasonable"


also


manipulated


versus


"exploitative


expectation


unreasonable"


future


. He


interactions










fair


reasonable


opponent


expecting


future


interactions


were


more


compromi


sing


behaved


cooperatively


than


when


opponent


was


perceived


as exploitative


spite


a high


expectation


future


interaction.


appears


that


expectation


future


interaction


leads


to cooperative


fair


behavior


reasonable


when


leads


other


to greater


party


is perceived


competitive


behavior


when


other


is seen


as competitive


or exploitative.


Consequences


of Expectation


Cooperative


Future


Interactions


As indicated


above,


there


substantial


evidence


which


suggests


that


an expectation


cooperative


future


interaction


leads


to cooperative


behavior.


Pallak


Heller


(1971)


found


that


commitment


to future


interaction


with


cooperative


partner


encouraged


acceptance


influence


attempts


partner


. Hancock


Sorrentino


1980)


found


that


anticipation


future


interaction


with


a group


enhanced


likelihood


conformity


group


norms


when


subject


received


prior


group


support.


-Yoav


Pruitt


(1984)


found


that


subjects


expected


cooperative


future


interactions


reached


higher


integrative


agreements


when


their


aspiration


levels


were


high.


In a family


decision


making


context


, Corfmann


Lehmann


(1987


found


that


spouses


were


more


committed


vv -a..&


marital


relationship


exercised










especially


other


is perceived


as a cooperative


partner.


This


enough


suggests


to obtain


that


expectations


a cooperative


future


behavior


: the


interaction


perception


a bargaining


opponent


as fair


reasonable


also


important


factor


Satisfaction


Robicheaux


-Ansary


1975)


suggest


that


satisfaction


fundamental


importance


in understanding


channel


relationships


. They


propose


that


a channel


member's


sati


sfaction


with


relationship


with


another


firm


results


higher


productivity within


channel.


Stern


Reve


1980


adopt


a similar


perspective


their


political


economy


framework


indicate


that


channel


member


satisfaction


directly

channel


affects

operates


the

. Thi


internal e

s suggests


efficiency with


that


which


satisfaction


within


channel


relationship


is an important


construct.


However,


bargaining


context,


may


more


important


to focus


sati


faction


stemming


from


outcomes


obtained


parties


st encounters


. To


understand


construct


satisfaction,


both


satisfaction


with


entire


relationship


and


satisfaction


with


past


negotiation


outcomes


are


addressed.










ina of


Satisfaction with a Relationshio and


Consequences


The earliest definition


buying


satisfaction in a


situation was offered by Howard and Sheth


consumer


1969


According


them,


consumer


satisfaction was:


The buyer's cognitive state of


bei


inadequately rewarded in a buying


sacrifice s/he has


undergone. (page


ng adequately or
situation for the
145)


Although


satisfaction,


construct.


this definition provides


fails


example,


some basic


to elaborate on


idea


the domain of


not clear whether


one should


include all


the attributes of


a product,


or reaction


to sales


assistance etc.


then measure satisfaction along all


those


dimensions.


Churchill


(1979)


emphasized


the need


specify the domain of


this construct


accurately.


Following


suggestion,


Ruekert and


Churchill


(1984)


define


channel member


the domain of


satisfaction as:


characteristics of


relationship between a


channel member


and another


institution in


the channel


which


the focal


organization finds


instrumental


rewarding


or satisfying


, profitable,
(page 227)


Based on

uncovered


this definition, Ru

four dimensions of


ekert and Churchill

channel member sat


(1984


isfaction.


These are


A product dimension


which


reflects


the demand


for,


staR r an0 nF fllltt flE


snri


t h0 m f liqfrflti rnr' nr n nriin1-


Mean


nll;rl i t~r nF










An assistance


dimension,


which


assess


how


well


manufacturer


supports


intermediary


with


such


aids


cooperative


advertise


programs


point


purchase


displays.


Soc


interaction


dimension


which


reflects


how


satisfactorily


interactions


between


manufacturer


intermediary


are


handled


, primarily


through


sales


representative


servicing


the account.


Hunt


Nevin


(1974


have


found


that


channel


member


satisfaction


with


respect


to all


aspects


a relationship)


may


lead


to higher


morale,


greater


cooperation


fewer


terminations


relationships,


fewer


individual


ass


action


suits

Lusch


reduced


1976


found


effort

that


to seek


channel


protective


member


legi


satisfaction


station.


leads


redu


friction


between


parties,


lower


dysfunctional


conflict,


increased


channel


efficiency.


Sati


sfaction


also


been


found


to be


related


exercise


power.


Specifically,


use


noncoercive


sources


power


tends


increase


satisfaction


while


use


coercive


sources


tends


to decrease


sati


faction


Lusch


1976;


Mitchie


Roering


1978


Stern


Reve


1980) .


These


empirical


studies


clearly


indicate


that


channel


member


satisfaction


plays


very


important


role


channel


performance.










found


to affect


the bargainer's behavior


in future periods.


Satisfaction/


dissatisfaction with outcomes


refers


to a


bargainer's


cognitive state of being


adequately or


inadequately rewarded


services


in terms of


outcomes.


Research on social motives has


shown


that bargainers


have different motives depending on whether


they are ahead


behind


their opponent in


terms of


their outcomes


(Messick and


Thorngate


1967


McClintock


et al.


1973) .


In a study by


MacCrimmon


(1973)


it was


found


that subjects who were behind


acted


their


own self-interest compared


to subjects who-


were ahead.


Corfman and Lehmann


(1987


found


that a


bargainer's decision history affected


the outcomes


in the


future periods.

dissatisfied wit


Specifically, individuals who were

h the outcomes of joint past decisions were


more


influential


in subsequent decisions.


They


indicate


that


this may be due


to either


increase in preference


preferred


outcomes or


a desire


to even


the score in future


encounters.


Siegel and Fouraker


(1960)


indicate


that high


dissatisfaction may even lead a bargainer


to maximize


opponent's displeasure at


risk of


own outcomes and


satisfaction.


In sum,


dissatisfaction with past outcomes


leads


to a


tendency to maximize own gain


the next bargaining










from


outcomes


differ


across


channel


members


having


equal


power


compared


to channel


members


having


unequal


power.


Summary


Research


marketing


, economics


, social


psychology


contract


law


provide


a bas


framework


conceptualization


long


-term


relationships.


Research


these


areas


suggest


that


long


-term


relationships


have


characteristics


which


are


different


from


short


-term


exchanges


or hierarchical


exchanges


. Research


also


suggests


that


trust


between


parties,


degree


power


imbalance,


expectations

satisfaction


about

with


future


interactions


existing


relationship


the d

play


degree


an important


emergence


long


-term


relationships


. Parties


involved


long


-term


relationships


exhibit


behaviors


which


are


substantially


different


from


those


having


short-term


relationships


exchanges


along


, and


dimensions


type


related


bargaining


focus


communication


strategies


adopted


parties


.The


next


chapter


develops


these


ideas


into


a conceptual


framework


which


looks


into


antecedents


consequences


a long


-term


orientation.













CHAPTER


CONCEPTUAL


FRAMEWORK


Overview


focus


this


dissertation


on negotiations


between


channel


members


involved


a long


-term


relationship.


conceptual


framework


identifies


constructs


which


affect


negotiation


process


outcomes


such


relationships.


In this


framework,


a set


of antecedent


factors


affects


motivational


turn,


orientation


instrumental


of a channel


determining


member,


which


the negotiation


process


outcomes


that


channel


member


. The


negotiation


process


outcomes


determine


post-bargaining


satisfaction


channel


member


. An


overview


conceptual


framework


presented


Figure


3-1.


Retailer'


Expectation


Future


Interactions


Recent


research


channels


distribution


(Heide


John


1990;


Anderson


Weitz


1989


indicated


that


longevity


a channel


relati


onship


dependent


on a channel


member


s perception


likelihood


that


relationship


will


continue


. Research


area


channels


a 2..I -- .


_--3


A- -


L.t. .-, I


I,, r


~u


II










the antecedents of


a retailer's expectation of


future


interactions.


Definition of


Retailer'


s Expectation of


Future


Interactions


Expectation of


bilateral


future


expectation of


construct captures


future


interactions


the perception of


continuity by a channel member.


the probability or


interactions and does not


likelihood of


capture the attitude


This


such

e towards


such a


relationship or


the desire


to conduct


such a


relationship with


the other


channel member.


Antecedents of Retailer'


Expectation of


SFuture Interactions


Prior


research has


indicated


that


factors


such as


transaction specific


investments by channel members,


degree of


envi ronmental


uncertainty and power


imbalance


significantly affect


a channel member


the expectation of f

(Heide and John 1990;


uture


interactions


Anderson and


Weitz


1990) .


However,


these studies


have not


looked at


the effects


the above mentioned


expectations of


future


constructs


interactions.


together on the

Further, the dimensions


environmental


different


uncertainty proposed


from those proposed


(Heide and John consider


this study are


the above mentioned studies


technological


and volume










interactions


. The


effect


various


antecedents


retailer


expectation


future


interactions


shown


Figure


Effect


decision


making


uncertainty


on retailer


expectation


of future


interactions


Decision


making


uncertainty


degree


to which


decision


making


units


an organization


cannot


anticipate


accurately


predict


environment


Pfeffer


Salancik


1978) .


example


from


a retailer's


perspective,


one


source


uncertainty


degree


to which


demand


cannot


accurately


predicted.


A major


benefit


a long


-term


relationship


reducing


uncertainty


environment.


A long


-term


relationship


along


with


other


forms


strategic


alliance


offers


innovative


response


to environmental


uncertainty.


Such


long-


term


relationships


result


in greater


access


information,


raw


materials,


markets


, technology


, capital


other


sources


expertise


which


allow


firms


to make


deci


sons


with


less


uncertainty.


Decision


positive


making


negative


uncertainty


impact


a retailer


on retailer


both


s expectation


future


interactions


Decision


making


uncertainty


makes


difficult


to specify


tasks


that


must


be performed


manner


i n wh; h


t-n ha


n r fIr mL


;,nr9


r r r


t"h P~t


h;ltlP


trcrnrlnr


Y











behavior


vendor


mechanism. In such

positively related

relationships and


leading


conditions,


failure


decision


development


thus,


retailer's


making<

long


expectation


market


uncertainty


-term


future


interactions.


However,


a long-term


relationship


may


have


other


difficulties


when


dealing


with


high


level


complexity


turbulence


in the


environment.


a s


hift


strategy


is needed


in such


uncertain


environments,


may


easier


retailer


to negotiate


with


or change


a new


vendor


than


an entrenched


vendor


(Arrow


1984).


Recently,


Balakrishnan


Wernerfelt


1986)


Heide


John


1990


indicated


Klein,


that


these


Frazier,


divergent


Roth


results


1990


may


have


better


explained


isolating


different


dimen


sons


uncertainty.


As a result,


dimensions


environmental


uncertainty


are


introduced:


envi ronmental


volatility


diversity.


These


dimensions


were


examined


Leblebici


Salancik


(1981)


found


to have


strong


effects


on the


deci


sion


processes


organizations.


Environmental


volatility


refers


extent


to which


market


demand


changes


are


rapid.


High


volatility


retail


demand,


industry would


inability


reflect


rapid


to predict


fluctuations


trends


future


in customer


outcomes










procedures


Therefore,


high


volatility


in specific


markets


should


lead


to low


levels


future


expectations.


Environmental


diversity


reflects


extent


to which


there


are


multiple


sources


uncertainty


environment


. Aldrich


1979


A retail


market


which


includes


multiple


users


products,


multiple


vendors,


many


competitor


would


capture


this


notion


environmental


diver


sity.


A firm


facing


such


a wide


variety


would


have


little


difficulty


formulating


element


effective

segmenting


strategic


programs


different


markets


each


. This


diverse

indicates


that


environmental


uncertainty


faced


an organization


need


experienced


an individual


buyer


dealing


with


specific


market


. This


will


encourage


retailer


buyer


develop


channel


structures


that


are


relatively


permanent.


Thus,


environmental


diversity


will


lead


to long


-term


relationships


resulting


higher


expectation


future


interactions


with


these


vendors.


: Environmental


retailer


s expect


volatility is n
tions of future


egatively


related


interactions


: Environmental


retailer'


diver


expectations


sity
of


is positively


future


related


interactions


Effect


transaction


specific


assets


on retailer


expectation


future


interactions










relationship


are


easily


redeployable


have


little


salvage


Long


value


-term


other


relationships


relationships


between


(Williamson


retailers


1981).


vendors


are


preserved


large


transaction


specific


investments


even


when


number


alternatives


large.


switching


costs


imposed


transaction


specific


assets


make


short


-term


exchanges


hazardous


(Treleven


19 87 )


Opportunism


vendor


retailer


is curbed


long


sticky


nature


exchange


relationship


through


transaction


specific


assets


. In


such


situations


idiosyncratic


investments


lead


"mutual


hostage


taking"


make


termination


relationship


an arduous


task


both


parties


Axelrod


1984


suggests


that


expectation


transaction


future


exchanges


specific


parties


assets


which


, there


itself


ers


a credible


capacity


retaliation


opportunism


exists


these


committed


situations


channel


, transaction


members


specific


relationship


investments

create


strong


exit


barriers


both


parties


thus,


increase


expectation


basic


future


argument


interactions


channel


is complicated


two


members.


distinct


sources


transaction


specific


assets


in the


retailing


context.


In a retailer


-vendor


relationship


each


party


might


invest


specific


assets


Therefore,


effects


are










situations


(e.g.


is high while


low)


transaction specific

transaction specific


the effect of


transaction spe


investment by retailer

investment by vendor

cific investments on


retailer's


expectation of


future interactions


likely


to be


negative.


level


by a retailer


transaction specific


vendor


investments made


is positively related


retailer's expectation


future


interactions only when


retailer and


vendor


invest


significantly


transaction specific


assets.


Effect of


competition in


vendor market on


retailer's


expectation of


future


interactions


Competition in


the vendor market


reflects


the number


alternate vendors available


retailer


a particular


product category


(Anderson and


Weitz


1986)


Economic


theory suggests


that market based


exchanges


are


more efficient when


there are a


large number


alternative


suppliers.


A large base of


suppliers


protects


retailer


from hazards of


opportunistic behavior


by a


vendor


because


any such opportunistic behavior


can be dealt by replacing


current vendor with a new one.


the other


hand,


when


number


alternative vendors


is small,


opportunism can


cripple


the exchange by significantly elevating


transaction costs.


Snr-r o~e a


Thus,


fho ro-n lor


I -N


competition


1~lllt~o


in vendor market


rn nrnforFo mI"rknt hscwri










H4: Greater
negatively


competition


related


vendor


to retailer


market


s expectation


future


interactions.


Effect


vower


imbalance


on retailer


expectations


future


interactions


Power


favorable


imbalance


or unfavorable,


degree


to the


asymmetry


retailer


power


in an exchange


relationship.


Power


is the


ability


one


party


to get


other


party


to do


something


which


other


party


would


normally


(Schopler


1965


Dahl


1964) .


An example


use


such


power


in a


forced


retailing


to provide


context


a full


is a situation


guarantee


where


guarantee


vendor


that.


unsold


merchandise


retailer


will


taken


back


vendor)


to a retailer


Such


full


guarantees


are


rarely


provided


most


vendors.


concept


power


can


also


viewed


terms


dependency

depends on


one


party


party


on another


B to achieve


. When

desired


a party


goal


A greatly


, party


considered


more


powerful


(Emerson


1962) .


According


power-dependence


theory,


dependence


one


party


(vendor)


on another


other


party


retailer


(retailer)


increases,


is greater.


power


Thus,


possessed


a retailer


power


advantage


arises


when


vendor


more


dependent


retailer


than


retailer


is on


vendor.










availability


alternate


retailers


would


contribute


vendor


power


over


retailer.


It has


been


found


laboratory


experiments


that


buyers


sellers


possess


a power


advantage


over


their


channel


partner


take


advantage


asymmetrical


power


situation


obtain


higher


outcomes


(Dwyer


Walker


1981;


McAlister,


Bazerman,


studies


Fader


using


1986) .


a survey


effect


methodology.


also


Anderson


been


Narus


found


1984


have


found


that


channel


members


possess


a power


advantage


concentrate


on translating


this


power


advantage


into


asymmetrical


outcomes


leading


to dissatisfaction


power


channel


member


A retailer


power


advantage


less


dependent


on the


vendor


than


vendor


on the


retailer


. In


other


words,


retailer


many


other


alternatives


which


can


provide


him/her


with


outcomes


comparable


current


outcomes.


As a result,


retailer


likely


to obtain


maximum


outcomes


from


current


vendor


using


offers


from


alternative


vendors


as a


leverage


in negotiations


. Even


current


relationship


terminated,


retailer


with


a power


advantage


can


obtain


outcomes


similar


those


previously


obtained.


Thus


, channel


relationships


ess


with


cooperation


a power


greater


imbalance


conflict


are


characterized


(Dwyer,


Schurr,










trust


between


channel


members


deteriorates


leading


short


-term


view


relationship.


H5: Power


imbalance


is negatively


related


in a retailer
d to retailer


-vendor


relationship


s expectation


future


interactions.


Effect


of Antecedents


on Other


Antecedents


effects


various


antecedents


retailer


expectation


future


interactions


on other


antecedents


shown


Figure


Effect


transaction


specific


assets


on competition


vendo r


market


Investment


in transaction


specific


investments


reduces


number


vendors


available


to retailer


as an exchange


partner


. Transaction


specific


assets


are


idiosyncratic


investments


tailored


relationship


between


a specific


retailer


vendor,


these


investments


lose


their


value


when


relationship


breaks


down.


In such


situations


, other


vendors


cannot


as substitutes


. Therefore,


transaction


specific


investments


create


exit


barriers


between


retailers


potential


vendors


thus


, reduce


number


substitutes


available


retailer.


Anderson


imbalance i


Weitz


s more


1989


pronounced


indicate


that


in conventional


effect
channel


th


power
.an in


w










Investment


retailer


transaction


is negatively


specific


related


assets


competition


vendor


market.


Effect


competition


vendor


market


on Dower


imbalance


Viewed


from


a dependence


perspective,


power


retailer


relative


dependent


on thi


to vendor

e retailer


degree


obtaining


to which

scarce


vendor


resources.


When


there


are


many


suppliers


market


each


whom


can


provide


similar


resources


to the


retailer,


retailer


more


power


compared


vendor


. The


vendo r


is more


dependent


Such


on the


asymmetric


retailer


dependence


than


retailer


situation


creates


is on


power


vendor.


favorable


one


party.


Competition


related


power


vendo r


imbalance


market


in the


channel


positively
1 dyad.


Effect


transaction


s oecific


investments


retailer


vendor


on Dower.


imbalance


Transaction


investments


specific


tailored


investments


to a relationship


are


such


specialized


that


relationship


were


to be


terminated


value


these


assets


outside


relationship


would


very


low.


Transaction


specific


investments


pose


problems


channel


members


unless


channel


partners


also


invest


reciprocating


transaction










terminated.


The potential


risk of


losing


specific


investments


by the retailer


the vendor


creates


a power


imbalance


relationship.


Transaction specific


investment by one party alone,


either
power


retailer


imbalance.


investments or


vendor,


When both parties


a lot of


specify


positively related
have no specific


investments,


specific investments are negatively related
imbalance.


Retailer


to power


s Long-Term Orientation


Pruitt and Kimmel


(1977)


after


reviewing


twenty years of


experimental


gaming


literature concluded


that a critical


factor determining


the behavior


a bargainer


at a given


point


in a negotiation game


the bargainer's short-term or


long-term perspective.


Bargainers with a short-term


perspective are concerned only with


the options and outcomes


the current negotiation while bargainers with a


long-term


perspective


focus on achieving


future goals


and are concerned


with both current and future outcomes.


According


their


review,


short-term perspective


leads


to noncooperative


behavior


by subjects


in a


Prisoner's


Dilemma paradigm while


long term perspective


results


in cooperative behavior.


this dissertation,


term


"orientation"


has been used


instead


term


"perspective"


, though both


terms have









interfirm exchange adopted by channel members.


Firms with


a short-term orientation rely on efficiencies of market


exchanges


while


to maximize


firms with a


exchanges


to maximize


their profits during


a negotiation


long-term orientation rely on


their profits over


relational


a series


negotiations.


Relational


exchanges obtain efficiencies


through


joint


synergies


resulting


from investment


exploitation of


idiosyncratic


assets


risk sharing.


Both


orientations have


the ultimate objective of


outcomes obtained by channel members,


maximizing


and do not


imply any


altruistic motives on


the part of


channel members.


Both long

conceptualized


-term and short-term orientations are


this dissertation as polar opposites on a


single dimension.


As a


result,


short-term orientation is


negatively correlated with long-term orientation.


In other


word


an increase


in short


-term orientation will


decrease


long-term orientation of


a channel member.


expository


clarity,


long-term


- short-term continuum will


referred


to as


the degree of


long-term orientation


Since


focus of


this dissertation is on


will be presented


from


the retailer,


the retailer's viewpoint.


hypotheses


However,


priori


there is no clear


case


these hypotheses


to differ


when


viewed


from a vendor's viewpoint.


A-~~~ A. A.- A -.1.- A


1,,, LY, L L: LL~LL


.


L









future interactions merely capture


the probability of


future interaction between


retailer


vendor.


Definition of Retailer'


Lona-Term Orientation


A retailer's


long-term orientation is


the degree


which a


retailer


is concerned with future outcomes


leading


a goal


of maximi


zing outcomes over


a long period


time.


Antecedents of


Retailer's Lona-Term Orientation


A retailer's


long-term orientation is affected by


economic,


environmental


section explicates


relationship factors.


the effect of


these


This


factors on a


retailer's


long-term orientation.


antecedents on retailer's


The effect of various


long-term orientation is


shown


Figure


3-3.


Effect


individual


trust on retailer's


lona-term


orientation


Trust


in an individual


is a belief


that an individual's


word


fulfill


or promise is


obligations


reliable and


in an


that


individual


exchange relationship


(Blau


will


1964;


Rotter


1967) .


This definition


emphasizes


truthfulness


aspect of


trust which Lindskold


(1978


refers


to as objective


credibility:


an expectancy held by an individual


that


vgl w










outcomes


a retailer


along


with


their


own


will


trusted


to a greater


extent


than


vendors


are


solely


interested


their


own


welfare.


It should


noted


that


second


type


trust


can


exist


even


when


objective


credibility


vendors


less


than


perfect:


vendors


may


way


they


they


will


because


competing


demands


or situations


beyond


their


control.


In other


words,


vendors


will


trusted


if their

(Lindskol


actions

d 1978).


are


perceived


In this


as benevolent


definition


trust,


retailer


focus


on an individual


s trust


other


person,


an individual


Retailer


s long


-term


orientation


also


affected


trust


they


have


on vendor


organization.


Trust


a vendor


organization


refers


belief


a retailer


that


vendor


organization


will


fulfill


obligations


exchange


relationship.


Trust


in an individual


vendor


or organization


have


similar


effects


on retailer


s long


-term


orientation.


Trust


affects


ways:


long


trust


-term


reduces


orientation


chances


a retailer


opportunistic


three


behavior


vendor,


trust


increases


confidence


retailer


long


that


short


period


-term

trust


inequities


reduces


will


resolved


transaction


over


costs


exchange


relationship.










agreement


terms.


writing


to unanticipated


to bounded


, negotiating


contingency


rationality


implementing


enforcing


costs


a contract,


comprehensive


possible.


contract


At best


involving


, only


a long


incomplete


-term


relationship


contracting


can


achieved.


Williamson


1981)


argues


that


such


incomplete


contracts


are


feasible


only


there


mutual


trust


between


parties


. Incomplete


contracting


in a trusting


relationship


means


that


, the


parties


agree


to adapt


to unanticipated


contingencies


in a mutually


profitable


manner


In such


trusting


relationships,


retailers


vendors


are


likely


respond


to inequities


through


solutions


over


long


-run


instead


responding


to inequities


through


opportunistic


behaviors


This


suggests


that


trust


acts


as a dampening


mechanism


opportunistic


behavior


in an exchange


relationship


Thus


, when


trust


exists,


long


-term


idiosyncratic


investments


can


made


with


limited


risk


because


channel


members


will


refrain


from


using


their


power


renege


on contracts


or use


a shift


circumstances


to obtain

trusting


profits


relationship


their

s are


favor

likely


(Lorentz

to have


1988)

lower


Further,

transaction


costs


incomplete


contracts


are


sufficient


running


exchange


relationship.


summary,


trust


reduces








: Trust


in an individual


vendor


is positively related


to retailer's


long-term orientation.


: Trust


in vendor


organization is


positively related


to retailer's


Effect of


long-term orientation.


retailer's dissatisfaction with Dast outcomes and


retailer's


lona term orientation


A retailer's dissatisfaction with past outcomes


reflects


a cognitive state of


feeling


inadequately


rewarded


past activities concerning


relationship


(Howard and Sheth


1969)

the r


These activities


wroduc t


in a


(satisfaction with


channel


distribution refer


product quality),


financial


(satisfaction with gross margin,


credit


policies),


ass i stance


(satisfaction with promotional


assistance),


and social


interaction


(satisfaction with


vendor's


representative)


dimensions of


relationship


(Ruekert and


Churchill


1984).


Research in


the area of


family decision making has


indicated

previous


that a dyad's decision history,


periods affects


1.e


the current outcomes


the outcome

(Corfman and


Lehmann


1987) .


Losses


in the past periods


increase


the desire


to even


the score


in current and


future exchanges


enhancing


the strength of


preferred outcomes.


This


similar


to Kelly and Thibaut's


1978


work where


the outcomes


themselves describe


In other words,


satisfactorinesss"


subjects who are dissatisfied due


the exchanges.


to lower


-,, t 4-.-\ n,.arl -i rf n ne r F t 1 1 vr


Clr ra


Ck A A ~ F1 C ~ r h


1; Lhl


Ar r C n Am A A


*I









behind but were concerned with


the outcomes


their


partners


along with


their


own when


they were ahead.


These studies


indicate


that


focus of


a bargainer


shifts


immediate or


short-term gains when he/she


dissatisfied with


past


outcomes.


Equity frameworks,


the other


hand propose an


intervening


"equi ty/inequity"


construct which determines


satisfactoriness of


the perceptions of


outcomes.


equity or


In other words,


inequity,


outcomes drive


leading


satisfaction or dissatisfaction with outcomes.


indicates


Equity theory


that dissatisfaction with past outcomes due


inequities


in distress will


exchange will


try to


result in distress.


restore


Individuals


the equity


relationship by emphasizing


their own outcomes


in future


periods.


This suggests


that


retail buyers who perceive


inequity in past negotiation encounters are


likely to


dissatisfied


leading


to a short-term view of


their


relationship.


H11:


A retailer's dissatisfaction with past outcomes


negatively related
orientation.


Effect of


retailer's


long- term


lona-term orientation on retailer's


lona-


term orientation


4 S .


~ndo


I










term orientation


reflects


the degree


to which


the vendor


focuses on


future outcomes


rather


than current outcomes


alone.


increase


in vendor's


long-term orientation,


indicates


greater


commitment of


the vendor


to continue and build


relationship.


As Dwyer,


Schurr,


and Oh


(1987


point out


that


relationships


that are committed,


are aware of


alternatives


but do not


indulge


in continuous and


frenetic


testing of


commitment


to each other.


A long-term oriented vendor


provides high and


considers


consistent inputs


relationship durable


to the


resulting


relationship,


in reduced risks


and higher

H12:


efficiency for


Vendor's


related


the retailer.


long-term orientation is positively


to retailer


long -term orientation.


Effect of


retailer's exDectations o f


future


interactions


retailer's


lona-term orientation


Research in Prisoner's Dilemma


paradigm


(Pruitt and


Kimmel


1977)


indicated


that bargainers who expected


future


interactions with


their partner


behaved more


cooperatively than bargainers who did not expect


future


interactions


. The


implication of


this


result


that a


anticipation of working with


the other party changes


attitudes


and behaviors of parties


involved


. Marlowe,


Gergen










subjects


in a PD experiment


behaved


cooperatively


towards


other


party


only


other


party


was


perceived


fair


reasonable


rather


than


being


exploitative.


This


suggests


that


retailer


s expectation


future


interactions


will


lead


long

fair


-term

and


orientation

reasonable b


only


oth


when


which


the

are


vendor

elements


is perceived


trust.


: A retailer


s expectation


future


interactions


itively


under


high


related
levels


to retailer


trust


s long


in vendor


-term


orientation


representative.


H14:


A retailer


positively


under


high


relat


eve


s expectation o
ed to retailer'


trust


future


long


in vendor


interactions


-term


orientation


organization.


Effect


dependence


on retailer


s lono


-term


orientation


Dependence


a firm


on B is


defined


degree


which


outcomes


to A from


obtained


best


relationship


firm


alternative,


are


highly


A exceed

outcomes


valued,


outcomes

obtained


A has


available


A from


alternative


sources


or potential


sources


exchange


Heide


John


1988)


One


sources


dependence


extent


investment


a channel


member


in assets


specific


relationship.


A retailer


invested


created


barriers


to exit


from


such


a relationship.


These


relationships


with


high


switching


costs


result


in an










opportunism


is to


vertically


integrate.


In a retailing


context


, vertical


integration


quite


often


a feasible


solution


(Heide


John


1988


.The


only


other


alternative


to develop


long


-term


relationships


with


vendors.


Long


-term


relationships


with


vendors


are


less


dependent


on the


retailer


could


safeguard


assets


reduce


dependence


over


long


-run.


A retailer


increases


transaction


specific


investment


in a relationship


translates


this


investment


into


outcomes


which


are


superior


best


alternative

dependence

balanced de


a vend

on the


pendenc


or


has,


can


retailer.

e between


increase


This

the


vendor


could result

retailer and


in a more

vendor.


In contrast,


dependence


a vendor


on retailer


increases,


retailer


opportunity


to deny


long


-term


contracts


with


vendor


which


could


be used


as a safeguard


vendor


against


retailer


s opportunistic


behavior.


other


words,


since


risk


associated


with


transaction


specific


assets


is vendor


retailers


are


less


likely


to be


motivated


to develop


a long


-term


relationship.


: Dependence


a retailer


on vendor


positively


related


to retailer


s long


-term


orientation.


: Dependence


related


to retailer


a vendor
's long-


on retailer


term


is negatively


orientation


Effect


Antecedents


on Other


Antecedents










Effect of


dissatisfaction with


Dast outcomes on vendor's


trustworthiness


Research in equity theory and


social


exchange e


theory


suggests


that


inequitable outcomes


the past affect


behavior


in subsequent


periods


(Adams


1965


; Kelly


Thibaut


1978) .


In a continuing


relationship


, dissatisfaction with


past


outcomes


indicates an inequity


in social


exchange.


According


to equity theory,


when individuals


find


themselves


participating


inequitable


relationships,


they feel


distress.


This distress


results


in physiological


psychological


arousal


such


as anger,


resentment,


mistrust.

disadvanta


Such social

ge in an ex


inequity which


change


leaves one -member


relationship affects


at a


their


feelings


towards


the other party.


Specifically,


feelings


such


resentment,


anger,


and being


taken advantage of


, generated


to dissatisfaction result


in suspicion and mistrust


the channel


partner.


In a retailing environment,


a retailer


perceives


inequity


in a


relationship due


to poor outcomes


the past will be dissatisfied and


likely to view the


vendor,


both as an individual


untrustworthy and


exploitative.


as an organization


Although,


to be


the retailer may


still


continue such a


relationship,


there is


likely to be a


reduced


level


trust


vendor.










H17:


A retailer'


negatively related
representative.


dissatisfaction with past


retailer'


s trust


outcomes


in vendor's


: A retailer


s di


negatively related


organization.


satisfaction with past


retailer


trust


outcomes


vendor


Effect of


Dower


imbalance on


trust


When one party possesses


a high leverage over


the other


party,


the stronger party becomes manipulative and


exploitative.


This


leads


the weaker party to mistrust


intentions


the stronger party.


Anderson and Weitz


1989)


found


that


power


imbalance significantly decreased


trust


between dyads


in conventional


channels.


In a


retailing


context,


a retailer who


lower power


than


vendo r


likely


to mistrust


the vendor.


Conversely


vendor who


lower


power


compared


to retailer


likely


to mistrust


intentions of


the stronger


retailer


, resulting


lower


trust.


them,


Retail


are


buyers who


likely to attribute


perceive a power


their mistrust


imbalance against


to both


organization and


individuals


representing


organization.


H19:


vendor


in vendor'


Power


imbalance


relationship


favoring


the vendor


is negatively to


representative.


in a


retailer


retail
s trust


Power


vendor


imbalance


relationship


favoring


the vendor


is negatively related


in a


retail


retailer'












Effect


transaction


specific


investments


on dependence


Transaction


investing


specific


party


assets


(Heide


create


John


exchange


1988)


difficulties


These


difficulties


could


arise


appropriate


because


some


an opportunistic


fraction


exchange


value


partner


immobile


assets


This


happens


investing


party


can


no longer


rely


on the


In other

specific


threat


words

asset!


to switch


, switching

s prevent c


to another


costs


redible


supplier


to immobile


threats


or vendor.

transaction


. Therefore,


extent


dependence


a function


magnitude


specific


assets.


H21:


Transaction


positively
vendor.


specific


related


: Transaction


positively
retailer.


specific


related


investments
dependence


investments
dependence


a retailer
a retailer


vendor


are


are


a vendor


Effect


transaction


specific


investments


a vendor


vendor


s lona


-term


orientation


Transaction


specific


assets


vend o r


are


immobile


assets


that


increase


dependence


vendor


on a


retailer


. Although,


to opportunistic


specific


behavior


assets


retailer,


vendor


they


also


could


send


lead


signals


.. .- ., p. r~w%4-.'t 1 n r a ~ -r A 4 r r I-r a Cmyn. .n s


rrrC4:l


r AA ~~ ; n A


tt~~~ A I*


FA C~A


Ar ~


r


fA


C~A










retailer


that


relationship


reduced,


thus


increasing


possibility of


a long-term relationship.


H22:


Transaction specific


positively related


orientation.


investments


the vendor


by a


vendor


long-term


are


Effects of


in vendor


vendor's


3KELOBUJEJ CligatatiDD DO.I 82dJUUL'JS


organization and


1trus


representative


Vendor' s


long-term orientation


supports


increased


levels


trust


several


reasons.


First,


when


the vendor


long-


term oriented,


retailers


believe


that


they can correct


short


term inequities.


Further,


when


the association is


perceived


to be more durable,


each party


is more confident


that


other will


fulfill


the obligations


faithfully


. Essentially,


vendor's


increases


long-term orientation


likelihood


(e.g.


of good behavior


through increased TSI)


on the part of


vendor,


reduces


the possibility of


opportuni


stic


behavior.


H24:


Vendor's


long-term orientation is positively


related


to retailer


trust


in vendor's


representative.


H25:


Vendor's


related


long-t


to retailer


erm orientation


s trust


vendor


positively
organization.


Summarv


Long-term orientation of


a retailer


is affected by


rat-n~~~~~~~ 4 a e a' r. tf -n %I fl %


;*rCAC~S


trust


raC~;larln nv


El~cllrh


c.'L\ ,










perceived dependence of


retailer


and vendor


on each


other.


Retail r


s Initial


Offer


Overview


A bargainer's

negotiation between


initial


offer


parties.


often sets

An initial


the tone of

offer conveys


important


information about bargainers perception of


their


adversary


, and


their


own aspirations and


limits.


example,


a high initial


that


offer


the bargainer


often sends a signal


has high aspirations.


the opponent


In some cases,


also


signals a


lack of


trust between


the bargainer


opponent.


Therefore,


initial


offer


is an


important


part


the bargaining process.


Definition of


Retailer's


Initial


Offer


initial


receive


s/her


offer


first


the benefits a retailer would

offer was accepted by the vendor.


initial


offer made by retailers


is a


function of


their


aspiration level.


Aspiration level


level


of benefit sought by a


retailer during a specific negotiation encounter


(Pruitt





--










offers


to protect


their


aspiration levels.


This


stems


from a


fear o

closer


f position


their


loss.


Once negotiators make


aspiration levels,


initial


is difficult


offers


them


increase


their


offers during


the negotiation without


losing


face


their


opponents.


As a


result,


to achieve


their


true aspiration levels,


conceal


negotiators


their aspirations by making


find it necessary to

initial offers which are


high and


offer


then


level.


trading concessions


Experimental


from this


evidence has shown


high

that


initial

higher


aspiration


levels


produce higher


initial


offers


(Hammer


Harnett


1975;


Yukl


1974)


Antecedents of


Retailer'


Initial


Offer


Relative


Retailer's own Asoiration Level


Retailer's


level)


initial


O


depends on whether


iffer

the


(relative


retailer


to own aspiration


the vendor makes


initial


offer.


Since,


the model


under


situations


is different


are depicted


, both are discussed separately.


in Figure


Retailer makes


two models


3-5.


initial 1


offer


Effect of


retailer's


long-term orientation on retailer's


initial


offer.


long-term orientation of


retailer


affects


their


initial


offer.


Retailers who are


long-term


- -- w









overtly concerned about


position


loss


(loss due


discovery of


true aspiration level by the other party)


Image


loss


(loss due


the discovery of


limits).


Even if


moderate initial


retailers


offers


are confident


result


that


in short


-term inequities,


such inequities will


balance out


long


run.


Long-term oriented retailers behave


responsively towards


the vendors and


expect t


similar


response


from


the vendor.


Retailers having a long-term orientation


tend


to be


truthful about


their


aspiration levels,


and hence


make


initial


offers which are closer


to their


aspiration


level


(Pruitt


1981).


A study by Schoeninger


and Wood


(1969)


found


that


intimate couples exchanged


truthful


information about


aspirations,


adopted


problem solving approach.


contrast,


stranger dyads


started out with high


initial


demands,


and made small


concessions


from this high


initial


demand.


H26:


Retailer' s


related


long-term orientation is


the retailer'


s initial


offer


negatively
(relative t


own aspiration level).


Effect of


vendor


lona-term orientation on


retailer's


initial


offer.


Vendor' s


long-term orientation


indicates a


commitment on


the part of


vendor


towards developing


a long-


term relationship.


Retailers who perceive


the vendor


to be


1 nn n rnrm nr4m ont oui


Rra r'nni r iont


that anR Qhnrt-- trm










retailers who consider


the vendor


long-term oriented are


likely to


take more


risks by being honest about


their


aspiration


levels,


resulting


in initial


offers close


their


aspiration levels.


H27:


Vendor's


long-term orientation is negatively


related


to retailer's


retailer's aspiration


initial
level).


offer


(compared


Vendor makes


initial


offer


Effect of


vendor' s


initial offer


on retailer's


initial


offer.


Research


in negotiations


indicates


that bargainers'


initial


offers are affected by their perception of


the other


party's


behavior.


One common occurrence


in negotiations


strategy imitation,


other party when


wherein a negotiator cooperates with


the other's actions are perceived as


cooperative and acts competitively when


the other


is seen as


competitive.


Opponent's


behavior


that


is seen as competitive


puts


target on


the defensive and


thus elicits a


competitive behavior


return


(Kimmel


et al.


1980) .


A common


imitation behavior


occurs when


the vendor makes a


tough


initial


offer.


When such an offer


is perceived as competitive


leads


to a similar


tough initial


offer by the


retailer.


Vendor's


long-term orientation affects


the attributions


a retailer makes


regarding


the vendor's


initial


offer.









retailer.


the other


hand,


tough


initial


offer


from a


short-term oriented vendor


likely to


be attributed


to a


desire


to make profits at


the expense of


retailer.


such


initial


situations,


offer


retailer


likely to attribute


as being exploitative and


unfair.


tough


This


likely to


result


in matching


initial


offer


greater


than


retailer's


true aspiration


level.


H28:


Vendor's


retailer's


initial


initial


offer


offer


aspiration level)


positively related


(relative


to retailer's own


Effect on


retailer' s


long-term orientation on retailer's


initial


offer.


rationale


this


hypothesis


the same


the one


in H25.


The only difference


that


the vendor


makes


initial


offer


this


case.


H29:


Retailer's


related
retailer


long-term orientation is


retailer' s


own aspiration


initial
level).


offer


negatively
relative to


Effect of


vendor's


19EQL191ELOlidit iddlJ2


vendr'.


initial


offer.


A vendor's


long-term orientation indicates a


commitment on


the part of


vendor


towards developing a


long-


term relationship.


Retailers who perceive


long-term oriented are more


likely


the vendor


to be


to expect an initial


offer


from a


vendor


close


the vendor's


true aspiration level.


Retailers


perceive


long-term oriented vendors


to be


truthful


about


their priorities and values.


This


similar


Cltitncan rnrvnri$-araA ,-l II ~i. ma 4. tn t. 4 nnaC:n t rr t


retailer s


vendor's


c~tll=rt; nnE









H30:


Vendor's


long-term orientation is negatively


related


to vendor's


own aspiration level)


initial


offer


(relative


to vendor's


Message Sendina


Behaviors and Disagreements


Research in negotiations


focused


on the


importance


initial


offers


in determining


the negotiation process


(Pruitt


1981


Research has


indicated


that an extreme opening


initial


to higher


offer


outcomes


(indicating a


tough strategy)


the bargainer making


can


initial


lead

offer


(Siegel and


Fouraker


1960;


Bartos


1966,


1970) .


However,


there


are


limitations


to such a conclusion.


Typically,


researchers


have


found


that


excessive


intransigence or


toughness may


lead


impasse and lack of


when bargainers do not

may be appropriate. Hi


agreement.


trust


gh init


Others


each other,

ial offers


have argued


that


a high initial

followed by a s


offer


series


concessions


(referred


to as


heuristic


trial


error


strategy)


allow suspicious bargainers


infer


each other's


priorities without direct disclosures


. In other words,


under


low trust concessions


establishing confidence


integrative agreements


In a


from a high initial


in each other


(Tutzauer


relationship which is


and Roloff

long-term,


offer


thus,


help


lead


1988).

the role of


initial


offer


becomes critical.


In contrast


situation


described above.


a hiah initial


offer


relative


to harnain r'










other


and has


serious


repercussions on negotiation behaviors.


A high initial


offer


in a


long-term relationship dictates


message sending behavior of


vendor,


which in


turn affects


message sending behavior


behaviors of


retailer.


retailers and vendors determine


The message sending


level


disagreement between


bargainers.


The model


is shown


in Figure


Effect of


retailer'


and distributive message sending behavior


Sa r f


Retailer's


initial


offer


(relative


to retailer's own


aspiration level


indicates


the degree


to which


retailer


truthfully reveals


the goals of


the negotiation.


retailer's


the vendor


initial


abandons


offer


exceeds


information


the aspiration level,


exchange


favor


distributive messages which include


threats,


putdowns,


fabricated


persuasive arguments


(Kimmel


et al.


1980).


other


hand,


a retailer's


initial


offer which


is close


retailer's


aspiration level


likely to


result


information exchange about priorities and ways


to solve


problems.


H31:


Retailer's


initial


offer


(relative


own aspiration level) is positively related
distributive message sending behavior.


to retailer's


to vendor's


initial


nffpr


nn vanrj n r c


-




Full Text
FACTORS AFFECTING NEGOTIATION PROCESS AND OUTCOMES IN
CONTINUING CHANNEL RELATIONSHIPS
BY
SHANKAR GANESAN
A DISSERTATION PRESENTED TO THE GRADUATE SCHOOL
OF THE UNIVERSITY OF FLORIDA IN PARTIAL FULFILLMENT
OF THE REQUIREMENTS FOR THE DEGREE OF
DOCTOR OF PHILOSOPHY
UNIVERSITY OF FLORIDA
1991

Copyright 1991
by
Shankar Ganesan


ACKNOWLEDGEMENTS
I wish to express my sincere appreciation to the
faculty, staff, and students in the Marketing Department at
the University of Florida.
First of all, I wish to express my gratitude and
appreciation to my advisor, Dr. Barton A. Weitz, for his
expert advice, tolerance, encouragement and for being a role
model I can follow for the rest of my research career. My
special thanks also go to Dr. John Lynch, whose encouragement
and advice were instrumental in the success of my
dissertation. I would also like to thank other members of the
faculty at the University of Florida: Professors Rich Lutz
and Alan Sawyer for offering critical comments during the
initial stages of this dissertation.
I would also like to take this opportunity to thank the
Center for Retailing Education and Research at the University
of Florida for sponsoring this dissertation research. My
thanks go to all the staff members at the Center for
Retailing, especially Kathy Brown. Due to the confidential
nature of the data collected in this dissertation, I may not
be able to thank the individual buyers and vendors of various
retailing companies, but suffice to say that I deeply
IV

appreciate the time taken by all these individuals in
completing the questionnaires.
Finally, I wish to express my deep appreciation to my
wife, Rama, for being a constant source of moral support over
the last three years.
V

TABLE OF CONTENTS
ACKNOWLEDGEMENTS iv
LIST OF TABLES viii
LIST OF FIGURES x
ABSTRACT xii
CHAPTERS
1 INTRODUCTION 1
Need to Manage Conflicts 2
Conflict in Manufacturer-Retailer Relationships 3
Role of Negotiations in Conflict Resolution 3
Unresolved Issues 5
Importance of Continuing Relationships 8
Negotiations in Continuing Relationships 10
Organization of the Dissertation 12
2 REVIEW OF THE LITERATURE 14
Overview 14
Definition of Various Forms of Exchange 14
Characteristics of Market and Relational Exchanges .... 16
Consequences of Relational Exchanges 22
Key Factors Governing Relational Exchanges 27
Summary 54
3 CONCEPTUAL FRAMEWORK 55
Overview 55
Retailer's Expectation of Future Interactions .55
Retailer's Long-Term Orientation 66
Retailer's Initial Offer 80
Message Sending Behavior and Disagreements 85
Conflict Resolution Strategies and Concessions 89
Negotiation Outcomes 93
Satisfaction with the Negotiations 95
Summary 98

4
METHODOLOGY
111
Overview Ill
Research Setting, Questionnaire Development,
Respondent Solicitation and Data Collection Ill
Development of Measures 124
Summary 153
5 RESULTS ' 17 3
Overview 173
Retailer's Expectation of Future Interactions 173
Retailer's Long-term Orientation 181
Retailer's Initial Offer 188
Message Sending Behaviors and Disagreements 192
Conflict Resolution Strategies 197
Retailer and Vendor Concessions 206
Satisfaction with the Negotiations 210
Summary 213
6 DISCUSSION 240
Overview 240
Contributions of the Dissertation 240
Directions for Future Research 244
Consequences for Practice 247
Limitations 249
Summary 251
APPENDICES
A SURVEY OF RETAIL BUYERS: PART A 252
B SURVEY OF RETAIL BUYERS: PART B 263
REFERENCES 276
BIOGRAPHICAL SKETCH 289
Vll

LIST OF TABLES
4-1 Frequency of Respondents Based on the Nature of
Relationship and Product Importance 155
4-2 Dependence of a Retailer on Vendor 156
4-3 Dependence of a Vendor on Retailer 157
4-4 Power Imbalance 158
4-5 Transaction Specific Investments by the Retailer 159
4-6 Transaction Specific Investments by the Vendor 160
4-7 Satisfaction with Past Negotiation Outcomes 161
4-8 Retailer's Trust in Vendor Organization 162
4-9 Retailer's Trust in Vendor's Representative 163
4-10 Retailer's Expectation of Future Interactions 164
4-11 Retailer's Long-Term Orientation 165
4-12 Vendor's Long-Term Orientation 166
4-13 Environmental Uncertainty 167
4-14 Retailer's Message Sending Behavior 168
4-15 Vendor's Message Sending Behavior 169
4-16 Retailer's Use of Conflict Resolution Strategies 1~ 0
4-17 Retailer's Satisfaction with the Negotiation 172
5-1 Means, Standard Deviations, and Correlations of
Variables Affecting Retailer's Expectation of
Future Interactions 220
5-2 Regression Equations and Estimated Standardized
Coefficients for Retailer's Expectation of Future
Interactions
221

5-3
Means, Standard Deviations, and Correlations of
Variables Affecting Retailer's Long-Term
Orientation 223
5-4 Regression Equations and Estimated Standardized
Coefficients for Retailer's Long-Term
Orientation 224
5-5 Means, Standard Deviations, and Correlations of
Variables Affecting Retailer's Initial Offer 226
5-6 Regression Equations and Estimated Standardized
Coefficients for Retailer's Initial Offer 227
5-7 Means, Standard Deviations, and Correlations of
Variables Affecting Retailer's Message Sending
Behavior and the Level of Disagreement 228
5-8 Regression Equations and Estimated Standardized
Coefficients for Retailer's Message Sending
Behavior and the Level of Disagreement 229
5-9 Means, Standard Deviations, and Correlations of
Variables Affecting Retailer's Use of Various
Conflict Resolution Strategies 231
5-10 Analysis of Retailer's Use of Various Conflict
Resolution Strategies 232
5-11 Means, Standard Deviations, and Correlations of
Variables Affecting Retailer's and Vendor's
Concession Behavior 236
5-12 Regression Equations and Estimated Standardized
Coefficients for Retailer's and Vendor's
Concession Behavior 237
5-13 Means, Standard Deviations, and Correlations of
Variables Affecting Retailer's Satisfaction with
Negotiations 238
5-14 Regression Equations and Estimated Standardized
Coefficients for Retailer's Satisfaction with
Negotiations 239

LIST OF FIGURES
3-1 Overview of the Conceptual Framework 99
3-2 Antecedents of a Retailer's Expectation of Future
Interactions 100
3-3 Antecedents of a Retailer's Long-Term Orientation .... 101
3-4 Antecedents Affecting Other Antecedents 102
3-5 Antecedents of a Retailer's Initial Offer 103
3-6 Antecedents of Level of Disagreements Between
Retailers and Vendors 104
3-7 Styles in Conflict Resolution 105
3-8 Determinants of a Retailer's Conflict Resolution
Strategy 106
3-9a Hypotheses related to the Retailer's Use of Problem
Solving and Compromise Conflict Resolution
Strategies 107
3-9b Hypotheses related to the Retailer's use of
Aggressive Conflict Resolution Strategy 108
3-10 Effect of Retailer's Conflict Resolution Strategies
on Retailer's and Vendor's Concessions 109
3-11 Effect of Retailer's Use of Conflict Resolution
Strategies and Concessions on Retailer's
Satisfaction with the Negotiation 110
5-1 Antecedents of a Retailer's Expectation of Future
Interactions 214
5-2 Antecedents of a Retailer's Long-Term Orientation.... 215
5-3 Antecedents of a Retailer's Initial Offer 216
5-4 Antecedents of Level of Disagreements Between
Retailers and Vendors 217
5-5 Determinants of a Retailer's Conflict Resolution
Strategy 218
x

5-6 Effect of Retailer's Conflict Resolution Strategies
on Retailer's and Vendor's Concessions and
Retailer's Satisfaction with Negotiation 219
xi

Abstract of Dissertation Presented to the Graduate School
of the University of Florida in Partial Fulfillment of the
Requirements for the Degree of Doctor of Philosophy
FACTORS AFFECTING NEGOTIATION PROCESS AND OUTCOMES IN
CONTINUING CHANNEL RELATIONSHIPS
By
Shankar Ganesan
May, 1991
Chairman: Dr. Barton A. Weitz
Major Department: Marketing
This dissertation describes a study of the antecedents
and consequences of a retailer's long-term orientation in a
negotiation situation. According to the conceptual framework
proposed in this study, retailers' long-term orientation is a
function of the following: the degree to which they trust
vendor organizations and their representatives, their
perception of vendors' long-term orientation, satisfaction
with past negotiations, expectations of future interactions
with vendors, and their dependence on vendors and the
vendors' dependence on them. Similarly, the hypotheses make
the following predictions about the consequences of long-term
orientation. Long-term orientation would result in initial
offers by retailers which were closer to their aspiration
levels, the use of more integrative messages and problem
Xll

solving conflict resolution strategies, fewer concessions and
a high level of satisfaction with outcomes.
One hundred retail buyers from six department stores and
their resources provided information on their relationship
and on a major negotiation conducted between them. The study
was conducted in two phases: the first phase captured the
retailers' long-term orientation and its antecedents and the
second phase, the negotiation process and outcomes.
The results indicated that retailers' long-term
orientation was affected by their perception of vendors'
long-term orientation, their trust in vendors'
representatives, their satisfaction with past negotiation
outcomes, their expectation of future interactions with
vendors, and the extent to which they depended on the
vendors. When the retailers made the initial offer, the
retailers' perception of the vendors' long-term orientation
had a significant effect on their initial offer. When the
vendors made the initial offer, vendors' initial offer was
significantly related to the retailers' initial offer.
Further, the retailers' initial offer was significantly
related to messages sent by both parties and the level of
disagreements between them. The strategy used by retailers to
resolve conflicts depended on the extent of disagreement and
the orientation of both parties towards developing a long¬
term relationship. The use of problem solving strategy
resulted in the fewest concessions by both parties while
xiii

compromising strategy resulted in the largest concessions by
both parties.
xiv

CHAPTER 1
INTRODUCTION
In recent years, a reduction in new market opportunities
and increased global competition has forced many
manufacturers to place greater emphasis on efficient internal
operations. To improve their internal efficiencies, many
corporate entities have reassessed their corporate functions
such as distribution. This reassessment in organizations has
led to a more balanced emphasis on the needs of consumer and
channel intermediaries. As Stern and El-Ansary (1988) note,
Economic battles involving producers versus producers or
middlemen versus middlemen will not, in the long run,
determine the ultimate victors in the marketplace.
Rather, the relevant unit of competition is an entire
distribution system comprising an entire network of
interrelated institutions and agencies.(page 27)
In essence, the competitive nature of the marketplace has
forced manufacturers to achieve channel efficiencies, which
in turn would provide them a sustainable competitive
advantage in the marketplace. In view of the importance of
channel intermediaries, management of conflicts between
manufacturers and channel members has become a major task for
most managers.
1

2
Need to Manage Conflicts
In a distribution channel, even though the role of each
channel member is unique, there exists operational
interdependence between channel members. This interdependence
is necessary for the delivery of form, time, place, and
possession utilities to consumers (Stern and El-Ansary 1988) .
In spite of this interdependence, the capabilities,
expectations, perceptions, and preferences of channel members
are quite different, leading to a state of latent conflict.
In many situations, this latent conflict becomes overt as the
channel members begin to exert their influence on each other
(Etgar 1979; Firat, Tybout, and Stern 1975; Rosenberg and
Stern 1971) . Therefore, a central task in channel management
is to resolve and manage channel conflicts (Stern and El-
Ansary 1988). In fact, a survey of managers dealing with
channel intermediaries has revealed that managers spend as
much as one-fourth of their time on conflict management
(Thomas and Schmidt 1976).
The importance of conflict management in distribution
channels has generated considerable research in the marketing
literature. This includes the empirical measurement of
conflict (Brown and Day 1981; Rosenberg and Stern 1971), the
causes of channel conflict (Cadotte and Stern 1979; Etgar
1979; Rosenberg and Stern 1971; Stern and Heskett 1969), the
strategies for reducing intrachannel conflict (Stern,

3
Sternthal, and Craig 1973), and the relationship between
power and conflict (Lusch 1976). This suggests that conflict
in distribution channels is a pervasive phenomenon (Reve and
Stern 1979).
Conflict in Manufacturer - Retailer Relationships
Conflict between channel members in a retailing
environment occurs over numerous issues. Some of these issues
are markup, terms of payment, transportation costs, delivery,
advertising allowances, and markdown money. Since these
issues encompass all elements of a retailing mix, a
retailer's profitability can be affected by the quality and
effectiveness of mechanisms employed to resolve them. In a
retailing environment, strong vendor relations can help a
retailer develop sustainable competitive advantage. Retailers
with strong relationships with vendors often receive
merchandise in short-supply, information on new and best
selling products, and competitive activity. Further, these
retailers receive the best allowable prices, and advertising
and markdown allowances. Clearly, the importance of resolving
conflicts and developing long-term relationships with vendors
is crucial to the survival and profitability of a retailing
organization.

4
Role of Negotiations in Conflict Resolution
Negotiations play a fundamental and crucial role in many
marketing contexts including manufacturer-dealer and
retailer-vendor relationships in a distribution channel,
buyer-seller interactions in industrial buying, and family
and consumer buying decisions. In many of these contexts,
strategies such as diplomacy, exchange of persons,and
adopting superordinate goals (Stern and El-Ansary 1988) can
be employed as means for resolving conflicts. However,
negotiations play a vital role in effective implementation of
all these strategies. As Stern (1971) indicates, "no matter
what conflict management mechanism is adopted by policy
makers within a channel, resolution is always the result of
bargaining--the making of commitments, offering of rewards,
or threatening of punishments or deprivation--between and
among the members" (page 132). Negotiation occurs in channel
situations when communication is possible and when each party
not only has an interest in cooperating with the other party
in order to achieve a mutually beneficial agreement, but also
has competing interests concerning the specific terms of that
agreement (Schelling 1960). As a result many of the recent
studies have focussed on bargaining behavior of channel
members in conflict situations providing additional insights
into interorganizational conflicts and interorganizational
management (Clopton 1984; Dwyer and Walker 1981; Eliashberg

5
et al. 1986; McAlister, Bazerman, and Fader 1986; Neslin and
Greenhalgh 1983; Schurr and Ozanne 1986).
Unresolved Issues
In spite of the recent interest in negotiation (or
bargaining)1 and its importance, most of these studies have
ignored or chosen to ignore some of the key characteristics
of bargaining in a distribution channel. These conceptual
models have not dealt with the following issues:
1. The continuing element involved in the bargaining process.
Most conceptualizations dealing with bargaining are
static, in the sense that bargaining occurs between parties
who do not have a large investment in the continuation of a
relationship. The distribution channel environment is
different from most other bargaining settings as the
relationship between channel members occurs for a
substantially longer period of time and channel partners have
a strong incentive to continue the partnership. This long¬
term, continuing aspect of channel relationship is important
because of the potential benefits of coordinated actions and
the high investment level needed to exploit these
interdependencies. Even in conventional channels there is an
emphasis on developing long-term relationships and sole
1 Most scholars in the area of negotiations agree that both
negotiations and bargaining can be used interchangeably
(Pruitt 1981). A few researchers differentiate the two by
using negotiations to reflect organizational bargaining and
bargaining to reflect individual level bargaining. In this
dissertation the two terms will be used synonymously.

6
sourcing of channel intermediaries. Therefore, the dynamics
of such a continuing relationship suggest a need to take into
account the impact of past relationships and to consider the
future implications of a current negotiation.
2. The notion of multiple buyers and multiple sellers.
Most models (except the paper by McAlister, Bazerman,
and Fader 1986) assume negotiations to be occurring in a
bilateral monopoly (a single buyer and a single seller).
However, in reality, the most common occurrence is the
existence of manufacturers dealing with multiple dealers or
retailers and most dealers and retailers carrying goods of
more than one manufacturer. In a retailing situation, this
often results in negotiations between one retailer and
multiple vendors. To capture this bargaining characteristic,
both laboratory experiments and field studies need to take
into account the comparison level of alternatives available
to the retailer. In a field study, this would entail either
obtaining information from the retailer on the set of vendors
being considered for the supply of a particular merchandise
and their offers or capturing the effects of multiple vendors
(through constructs such dependence and power imbalance) on
negotiation strategy. In a laboratory experiment, this
indicates the use of multiple vendors in the bargaining
setting to allow a retailer an opportunity to interact with
multiple vendors. The only paper which has incorporated this
important bargaining characteristic is the paper by

7
McAlister, Bazerman, and Fader (1986). However, the notion of
multiple sellers and buyers was introduced in this paper as a
manipulation of the power imbalance. Future experiments
should try to understand the impact of competitive offers
from the entire set of vendors being considered by the
retailer.
3. The relationships between individuals and their
organization.
An issue in distribution channels which has been debated
extensively is the use of key informants for capturing
organizational characteristics. Phillips (1981) indicates
that many of the paradigms used in distribution channels
attempt to explain and predict the behavior of organizations
or organizational subunits and not individuals. According to
him, since organizational characteristics are quite different
from individual characteristics, the notion of key informant
reports as valid indicators of organizational characteristics
is questionable. One approach suggested by Phillips (1981)
would be to use informants at different levels in an
organization to capture organizational level constructs. An
alternative approach is to specify the levels at which the
constructs operate. For example, an important construct which
is used in this dissertation is trust. Trust can be specified
either at an individual level or at an organizational level.
Individual or interpersonal trust would be most appropriately
measured from the retail buyer's viewpoint. Even from the
retailer buyer's viewpoint, one should measure separately the

8
trust of the vendor's representative and his organization. In
contrast, organizational trust may be captured through a
reputation construct, where inputs from multiple informants
both from within the organization and outside the
organization are obtained. This suggests that there is a
need in distribution channel research to clearly specify the
constructs and the levels at which they operate and then
develop appropriate measures.
Importance of Continuing Relationships
The focus of this dissertation is on negotiations
between channel members having a continuing relationship in a
retail environment. Retailers in the past, have tended to
concentrate on short-term problems mainly because of intense
daily activity. However, the retail environment has changed
considerably due to greater intertype competition (e.g. Wal-
Mart vs. Eckerds on pharmaceutical products), growth of
vertical marketing systems, changes in technology and
consumer needs, and acceleration of institutional life cycles
(Stern and El-Ansary 1988). This change in retailing
environment has led to a greater emphasis on long-range or
strategic planing. An important aspect of strategic planning
is to develop a sustainable competitive advantage which can
earn greater profits and higher returns on investment for
retailers over the long-run. Retailers can build sustainable
competitive advantage either through efficient internal

9
operations (such as inventory and distribution management) or
by external relationship with suppliers and customers.
Efficient external operations involve developing strong
relationships with the immediate environment: the customers,
and the vendors. In other words, a key factor in developing a
sustainable competitive advantage is strong vendor relations.
Strong vendor relations can result in a long-term
advantage in many ways. Two major ways a retailer can achieve
long-term advantage is by getting the merchandise made
exclusively for them (private brand) or developing a strong
relationship with the vendor such that the vendor will sell
exclusively to them (exclusivity). Long-term vendor
relationships have other advantages such as delivery of items
which are under short supply, sharing of market information
and preference with respect to discounted merchandise. In
essence, long-term relationships provide the retailer with
several different mechanisms for obtaining sustainable
competitive advantage.
However, in spite of the obvious advantages of long-term
relationships, the traditional approach in retailing has been
the adversarial approach (Shapiro 1985), where vendors are
pitted against each other to obtain the best possible deal.
Such an approach is advantageous only in the short-run as
vendors face tremendous uncertainty in such relationships.
Often in these situations, vendors are less committed to the
relationship and actively seek alternative retailers who
would provide them with a more stable relationship.

Negotiations in Continuing Relationships
The main thrust of negotiation research in social
psychology and game theory until now has been to develop
models which explain the process and outcomes of negotiations
between two parties in a single period. These single period
or static models do not take into consideration the past
behavior or future anticipated behaviors of the two parties.
This narrow focus of negotiation researchers in both social
psychology and game theory stems from the assumption that
negotiation occurs between parties who do not have a
continuing relationship. As a result, the application of most
negotiation research to areas such as manufacturer-
distributor or retailer-vendor relationships which are
dominated by continuing or long-term relationships is
suspect. To clarify this difference, let us consider the
relationship between a consumer and a dealer negotiating the
sale of a car. The relationship between the two exists until
a sale is consummated assuming that no fraudulent activity
occurred in the deal. The dealer and the buyer are not
concerned with future or past relationships in any explicit
fashion except when the dealer expects the goodwill to create
future sales. In most situations, the bargaining occurs
between the two parties only on issues relevant to the
product to be purchased. In contrast, the relationship
between two channel members such as manufacturer and

11
distributor or a vendor and retailer is relatively permanent.
DuPont, a manufacturer of consumer and industrial goods,
calls this relationship with its dealers a "marketing
partnership." The key characteristic of this relationship,
according to DuPont, is the desire to seek permanence and be
committed in its relationship with the dealer. Toys 'R' Us, a
leading retailer in toys, indicates that a strong
relationship with the vendor is essential to developing a
sustainable competitive advantage. The emphasis in such
relationships is the expectation that the relationship will
continue to grow and be attractive compared to their
competitors.
The example discussed above tries to bring out the
difference in focus of previous negotiation research and
conceptual model presented in this dissertation. This
dissertation is concerned with negotiation between retailers
and vendors who have continuing relationships. In this
situation, the researcher has to focus on antecedents which
determine the long-term orientation of the channel members
and the effect of such orientation on the eventual outcomes.
This expands the focus of negotiation research from a
restricted emphasis on current strategies and outcomes to a
broader view of negotiation which considers both the past and
future of an existing relationship.

12
Organization of the dissertation
This dissertation comprises of six chapters. A brief
description of each chapter is provided below.
Chapter 1 introduces the need for research in
negotiations between parties having a continuing
relationship. As seen in this chapter, the current research
in negotiation views negotiation between parties as discrete
without any effect of past or future of an ongoing
relationship.
Chapter 2 is a review of the research done in
negotiations and continuing relationships. This chapter looks
in detail at the characteristics of short-term and long-term
relationships, the notion of interpersonal and
interorganizational trust, the conceptualization of power,
the research on future expectations and dissatisfaction with
outcomes.
Chapter 3 describes the conceptual model of the
dissertation. The conceptual framework identifies constructs
that affect the nature of interactions between retailers and
vendors involved in a continuing relationship. In this
framework, a set of antecedent constructs affects the
motivational orientation of the channel member resulting in
negotiation process behaviors and outcomes. These negotiation
outcomes determine the post-bargaining attitudes of the
channel members.

13
i
Chapter 4 describes the methodology used in the
dissertation. This chapter deals with the setting for
collecting data, the data collection process, the measures
used, and the method of analysis.
Chapter 5 focuses on the results obtained from the
analysis of data collected for this dissertation. This
chapter describes the individual relationships between
constructs that are significant and also speculates on
possible reasons for some insignificant results.
Chapter 6 provides a discussion of the results and a
brief summary of the significance of this dissertation. This
chapter also mentions possible future avenues of research in
negotiations between continuing channel members.

CHAPTER 2
REVIEW OF THE' LITERATURE
Overview
Research investigating the different forms of exchange
has mainly emerged from the economics literature dealing with
vertical integration issues (Williamson 1975), and contract
law (Macneil 1978) which focussed on contractual obligations
in long-term relationships. This chapter provides an overview
of various streams of research focussing on the development
of long-term relationships, various antecedents of long-term
relationships, key characteristics and finally, the
consequences of long-term relationships on behavior of
channel partners. This chapter emphasizes four factors which
determine the existence and development of long-term
relationships1: trust, power, satisfaction, and expectations
of future interactions.
Definition of Various Forms of Exchange
Research on interorganizational relationships has mainly
focussed on two forms of exchange: market and hierarchical
exchanges. Market exchanges are based on the efficiencies of
1 In this dissertation long-term relationships are
interchangeably used with relational exchanges which are
defined in the next section.
14

15
competitive markets. Using this approach, retailers primarily
buy on price, and use multiple sources of supply to obtain
the best possible deal from the vendor. Often, this involves
switching suppliers over time and using competition among
vendors to obtain the best outcome. A market exchange is
inherently short-term oriented because it focuses on outcomes
from one transaction.
Another form of exchange known as hierarchical exchange
has been used in the literature to denote exchanges between
vertically integrated units (Williamson 1975). This results
in retail buyers working within their own organization to
have merchandise produced rather than buying it from an
independent vendor in the market. Both these exchanges form
the opposite ends of a continuum.
An intermediary form of exchange is the relational
exchange (Macneil 1979; Dwyer, Schurr, and Oh 1986; Frazier,
Spekman, and O'Neal 1988). Relational exchanges occur when
independent buyers and sellers develop relationships with a
long-term orientation (Spekman and Johnston 1986). A
relational exchange has the advantages associated with both a
market exchange and a hierarchical exchange. Specifically,
the relational exchange achieves benefits through scale
economies obtained from dealing with independent specialists.
Since relational exchanges are characterized by mutual trust,
long-term planning, and a high level of commitment between
the two parties, these relationships offer benefits of
coordination similar to those achieved in hierarchical

16
relationships. While relational exchanges provide significant
benefits to both parties, they are fragile due to the absence
of a strong governing mechanism such as the marketplace or
bureaucracy.
Characteristics of Market and Relational Exchanges
The discussion above has pointed to three different
approaches in retailer-vendor relationships. First, a market
exchange where the focus is on current transactions, second a
relational exchange where the focus is on future
transactions, and third a hierarchical exchange where the
focus is on future transactions through bureaucratic control.
These approaches highlight characteristics which are quite
different from each other. The characteristics of two
approaches (market and relational) are discussed in this
section (hierarchical exchange is not particularly relevant
in this context).
Time Frame for Exchanges
Market exchanges tend to viewed as "discrete
transactions" with parties having very little commitment to
each other. This leads a channel member to focus on the
current transaction. A relational exchange is characterized
by a higher level of functional interdependence where shared
values and goal compatibility become more important. This
forces the channel members to concentrate on future
exchanges. Macneil (1978) suggests that in discrete

17
transactions all future implications of a relationship are
brought to the present; thus disallowing consideration of any
future transactions. In comparison, relational exchanges
incorporate future transactions in the present. According to
Macneil (1980), the present in relational transactions is
used for planning and preparing for a future not arrived.
Goal Incompatibility
Goal incompatibility in a relationship is the degree to
which a set of specific goals and objectives of one party are
incompatible to those of other party (Stern and Heskett
1969) .
Studies in channel management have focussed on the
effect of goal incompatibility on channel conflict. In their
study of franchised distribution network of a large
industrial installation manufacturer, Eliashberg and Michie
(1984) found different sets of goals for the franchisor and
franchisee. Even the preference orderings on different goals
for the franchisor and franchisee were different. Anderson
and Weitz (1989) found that goal compatibility among channel
members in the industrial sector led to higher levels of
trust and a desire to continue the relationship for a long
time. In spite of these studies, there is no systematic
evidence regarding the level of goal incompatibility in
relationships which are based on market exchanges versus
those which are based on relational exchanges. Conceptually,
since the success of relational exchanges depends on shared

18
values, trust and two-way communication , one would expect a
higher level of goal compatibility between the parties.
Transaction Costs
According to the transaction cost framework (Williamson
1979, 1981) firms strive to economize their transaction
costs. Transaction costs are costs associated with writing,
negotiating, and implementing a contract between two parties.
In market exchanges which are based on discrete transactions,
the transaction costs are low due to several reasons. First,
discrete transactions do not envisage any future transactions
and hence no contracts are needed for enforcement of
contingencies at a future point in time. Second, discrete
transactions depend on the efficiency of the market system
and hence have little transaction specific investments. As a
result, both parties can change partners without worrying
about the investments idiosyncratic to the relationship.
Third, discrete transactions are enforced by social norms and
occasionally by law. It is easier to monitor such exchanges
because of the relatively low level of ambiguity in objects
of exchange.
In contrast, relational exchanges encourage the
development of specialized investments which are
idiosyncratic to the particular transaction and, hence,
cannot be easily redeployed. These transaction specific
investments increase the dependence of one party on another
and also increase the susceptibility of parties to

19
opportunistic behavior by the other party. To reduce
opportunistic behaviors, parties have to write contracts
which indicate how future contingencies would be resolved.
This increases the transaction specific costs. An alternative
mechanism used by channel members in relational exchanges to
reduce opportunistic behavior and reduce transaction specific
costs is to develop a high degree of mutual trust. This would
obviate the need for any contingent claims contract between
the parties.
An empirical issue that has not been addressed so far in
the literature is whether relational exchanges are
characterized by high transaction costs.
Transaction Specific Investments
According to Frazier et al. (1988) relational exchanges
involve high levels of specialized investments in human and
physical assets. Often, in relational exchanges such as Just-
In-Time (JIT) exchanges, specialized investment in durable
assets such as a new plant next to the Original Equipment
Manufacturer (OEM), new warehouses, more delivery vehicles
are essential for the close functioning of the OEM and
supplier. In many cases, these specialized investments cannot
be transferred or redeployed elsewhere. Therefore, these
transaction specific investments raise the level of
dependence, thereby increasing the susceptibility of both
parties to opportunistic behavior by the other party. At the
same time such investments signal commitment and willingness

20
of the parties to dedicate resources to the partnership.
Ford, which is a champion of JIT exchanges, makes substantial
investment in its suppliers to improve their productivity and
efficiency. Often, Ford has helped suppliers install new
CAD/CAM systems to design many of their component parts
instead of providing all the specifications to the supplier.
In the area of interpersonal relationships, close
relationships have been found to have a higher level of
irretrievable investment, i.e., investments in time, energy,
emotional costs, self-disclosures, and money (Kelly 1978).
Rusbult's (1980) investment model indicates that
relationships which have a higher level of investment may
have greater commitment, i.e. a sense of loyalty to the
partner, an expectation of continuity of the relationship,
and a willingness to sacrifice short-term outcomes in order
to strengthen the relationship.
In a retailing environment,there seems to be some
evidence that retailers and vendors who have relational
exchanges have a high degree of transaction specific
investment. JC Penney, a leading department store chain, has
developed computerized procurement and inventory systems
along with their long-term suppliers to minimize inventory
costs.
Planning
The focus of planning in discrete transactions is
limited to the substance of exchange (Macneil 1978) . The
planning between parties is very specific and complete,

21
mainly because future contingencies do not exist and the
exchange is a simple, monetizable economic exchange (Macneil
1980). On the other hand, relational exchanges focus on the
substance of planning only for the initial period; the main
focus is on planning the structure and process of exchange
(i.e rules and regulations for the conduct of exchange in
future periods). The parties to the exchange realize that
planning for specific issues occurring in future is costly
and difficult and hence, the focus of planning is on
establishing self - regulatory mechanisms. These mechanisms
establish approaches to solve problems in a mutually
beneficial way when gaps exist in the planning process.
Partners in a relational exchange are likely to share
future plans and take into consideration the potential
outcomes of their partners. Partners in a relational exchange
are more likely to share information about the technological
advances and new innovations, and thus identify opportunities
in future and plan for it.
Level of Risk
Due to the functional interdependence and high level of
transaction specific investments, relational exchanges are
perceived as relatively high risk by the parties to the
exchange. In JIT exchanges, which are at the extreme end of
the relational exchange continuum, OEMs often rely on single
sourcing for a component part, which substantially increases
the risk associated with the relationship.

22
In contrast, the risk associated with discrete
transactions is low as the parties depend on efficiencies of
competitive markets. In fact multiple suppliers are often the
rule, indicating a spread of risk across suppliers.
Consequences of Relational Exchanges
In spite of lack of empirical evidence regarding the
consequences of relational or long-term exchanges, there
seems to be some evidence based on actual relationships that
relational exchanges improve the profitability of exchanges.
This section focuses on the effect of long-term relationships
on issues discussed during the exchange, and the
communication and bargaining strategies employed.
Focus of Exchange
Theoretical research in the area of industrial
purchasing (Frazier, Spekman, and O'Neal 1988; Spekman 1988)
suggests that the focus of exchange in a market exchange is
the price of a product. The original equipment manufacturer
(OEM) relies on a large number of suppliers who can be played
against each other to obtain the best possible price. The
buyer considers all potential sources as homogeneous, and
therefore the risk associated with switching from one
supplier to another is very low. This results in a low degree
of interdependence between the parties. In contrast, OEMs who
deal with suppliers having differentiated products compared
to other competitors are more interested in developing

23
relational exchanges. Salmond (1987) argues that relational
exchanges develop between OEMs and suppliers when suppliers
offer customized-differentiated parts to the OEM. This
differentiation provides the OEMs an incentive to focus on
the core product and the value added services rather than the
price of the product alone. The focus of such an exchange is
no longer on the price of a product but on cost containment,
value analysis, and joint product development (Spekman 1988).
An issue which needs to be addressed empirically is whether
the focus of exchange on value added services and core
product is a direct consequence of differentiated product
offered by the supplier.
Communication
Communication between parties in an exchange
relationship can be discussed in terms of frequency and
content of communication.
Macneil (1978, 1980) indicates that relational
transactions are characterized by extensive, deep, and
informal or formal communication. In contrast, communication
between parties in a market exchange characterized by
discrete transactions are limited and formal.
In an industrial purchasing context, Frazier et al.
(1988) argue that communication between OEMs and suppliers in
a discrete transaction is limited to the delivery system and
terms and conditions of the agreement. In contrast, OEMs and
suppliers in a relational transaction tend to communicate

24
more frequently and on issues such as cost containment, new
product development, value analysis, and joint designs.
Often, OEMs and suppliers work closely to define quality
standards and devise ways and means to implement statistical
quality control procedures. This increased level of
interdependence generates intense, informal, and frequent
communications between the two parties.
In channel management, most of the literature deals with
communication between manufacturers and distributors. Stern
and El-Ansary (1988) indicate that communication plays an
important role in the efficiency of a channel system's
performance. According to Teas and Sibley (1980)
communication reduces role ambiguity and thus improves
channel performance. Anderson and Weitz (1989) have found
that intense communication occurs between firms having high
stakes and greater trust. As relational exchanges result in
high stakes due to the high level of transaction specific
investment in the relationship, communication, both intense
and informal, can be expected between channel members in a
relational exchange.
Long-term relationships in the area of interpersonal
relationships are also characterized by increasing
interaction, greater openness for longer periods of time, and
across a wide array of situations (Burgess and Huston 1979) .
Altman and Taylor's (1973) research on social penetration
suggests that as relationships get closer, the breadth and
depth of disclosures increase.

25
In the area of bargaining and negotiations, several
studies have looked at the antecedents of communication,
especially message sending behaviors (Pruitt 1981) . Although
most bargaining studies have looked at relationships from a
static or a discrete viewpoint, a few studies have looked at
the effect of anticipation of future interactions on the
behavior of bargainers (see section on expectation of future
interactions for a more detailed discussion). These studies
indicate that anticipation of future interactions leads to
cooperative behaviors (Ben-Yoav and Pruitt 1984) when the
other party is seen as cooperative. These cooperative
behaviors are often in the form of cooperative communication
where one's goals, priorities, and values are conveyed to the
other party.
Bargaining
Macneil (1978) indicates that bargaining in a discrete
transaction focuses mainly on the price of a product. This
focus on price leads to "distributive" bargaining, which
focuses on how the available benefits are to be distributed.
In contrast, in relational transactions, both parties strive
for "joint creative effort" or mutually beneficial outcomes.
This is done by extending the bargaining horizon to include
future periods of time.
Arndt (1979) has emphasized the importance of
domesticated markets, which are markets where transactions
are held inside a company (such as in vertically integrated

26
units) or inside the boundaries of a group of companies
committed to long-term cooperation. He argues that
negotiations in domesticated markets focus on structural
issues, and not on transactional (focus on specific
transaction) or contractual (time-bound agreements) issues.
These structural negotiations are strategic as they apply to
the form and intensity of long-term relations. Arndt (1979)
and Dwyer, Schurr, and Oh (1986) make a case for increased
research in the area of negotiations for long-term
relationships.
Most of the studies in social psychology and game theory
have focussed on discrete negotiations (focus on specific
transactions). A few studies in social psychology have
attempted to capture the long-term orientation of the
bargainer by manipulating the presence or absence of future
interactions with the other bargainer (Ben-Yoav and Pruitt
1984; Gruder 1971; Shapiro 1975; Marlowe, Gergen, and Doob
1966; Roering, Slusher, and Schooler 1975). Bargainers in the
presence of future interactions were told that they would be
in a cooperative task with their current bargainer at the end
of the bargaining session while subjects in the absence of a
future interaction condition were not given such
instructions. It was found that bargainers who anticipated
future interactions with the other party behaved more
cooperatively than bargainers who did not anticipate any
future interaction. This indicates that the perception of the

27
negotiator regarding the length of the relationship, affects
the negotiation behaviors and tactics.
Key Factors Governing Relational Exchanges
There are several factors which affect the emergence and
development of relational or long-term exchanges. This
dissertation focuses on four such elements: trust between
parties of exchange, the extent of satisfaction
/dissatisfaction between parties, the expectations about
future interactions, and the degree of power imbalance
between the parties. Each of these factors is discussed in
depth in the following sections.
Trust
Goliembiewski and McConkie (1975) indicate that there is
no single variable that so thoroughly influences
interpersonal and group behavior as trust. The burgeoning
literature in social psychology and marketing emphasizes an
important point: trust acts a salient factor in determining
the spirit and character of a huge range of relationships.
The same literature indicates that trust is critical in
personal growth and development as well as in task
performance. To some observers, trust seems to be an edifice
on which healthy personalities are built. Some others see
trust as a major facilitator of group accomplishment and
managerial problem solving. To rest, trust is the most

28
important component of labor relations and bargaining (Nigro,
1969). Although this does not exhaust the entire catalog of
applications, it does offer a cursory glimpse of centrality
of trust in much social behavior.
Meaning of Trust
In social parlance, trust and its synonyms have been
used so often with such varied intentions that vagueness is
apparent in the multiple meanings given to trust. For working
purposes, at least, in common usage:
Trust implies reliance on, or confidence in, some event,
person, or thing.
Trust reflects an expectations about outcomes based on
perceptions and life experiences.
Trust indicates a charge or duty imposed in faith or
confidence as a condition of some relationship.
(Webster's New International Dictionary).
All of these definitions imply some expectations of some
kind--but the different kinds of expectations are not clearly
distinguished (Barber 1983). Following Barber (1983),
"Expectations are the meanings actors attribute to themselves
and others as they make choices about which actions and
reactions are rationally effective and emotionally and
morally appropriate" (page 9). The concept of expectations is
a generalized one, and as a result only those expectations
which are related to the fundamental meanings of trust are
explored here. The three expectations are
1. The expectation of the persistence and fulfillment of the
natural and the moral social orders.

29
2. The expectation of technically competent role performance
from those involved in social relationships and systems.
3. The expectation that partners in interaction will carry
out their fiduciary obligations and responsibilities.
The first expectation is the most general one which all
humans internalize: the persistence of natural and moral
social order and its realization. Luhmann (1980) points out
that such a generalized trust helps in reducing the
complexity of social life. One does not worry about the sky
falling down or a person being slapped by others, simply
because of this generalized trust. Several social
psychologists have highlighted the importance of this
generalized expectation or trust as an aid to general
development and learning abilities of individuals (Gibb 1964;
Rotter 1971).
Against this backdrop of generalized expectancy, the
second and third expectations have very specific meanings.
The second definition refers to the meaning of trust as the
expectation of technically competent role performance. The
competent performance expected may relate to expert
knowledge, technical facility or everyday performance by an
individual. In a retailing context, a vendor who delivers the
goods on time may be considered trustworthy, as a result of
technically competent role performance.
The third definition of trust as a fiduciary obligation
goes beyond the notion of technically competent role
performance. Technically competent performance can be

30
monitored very easily. However, when situations arise where
such performances cannot be monitored, trust becomes an
extremely powerful medium which directs exchange
relationships. A fiduciary obligation is placed on the vendor
or retailer to perform in a way that does not take advantage
of the trust imposed on them.
The second expectation seems to reflect the focus of
trust in the bargaining literature (Pruitt 1981) . Trust is an
expectancy that a person's word, promise is reliable and that
the person will fulfill the necessary obligations in a
competent manner in an exchange relationship (competent role
performance). Lindskold (1978) refers to this expectation as
"objective credibility."
However, the third definition of trust as a fiduciary
obligation seems to be a key element in the conceptualization
of trust. A person may not always act the way s/he says s/he
will but will be trusted if the actions are considered
benevolent by the partner. Lindskold (1978) refers to this as
an attribution of benevolence or nonmanipulativeness. In
other words, if a person is perceived as someone who cares
about the outcomes of others and is nonmanipulative, s/he is
likely to be trusted.
Swan and Nolan (1985) define trust in terms of its
components such as feelings, beliefs, and intentions of
trust. According to them, a feeling of trust is an emotional
component which refers to the degree of positive feeling
about the veracity of a object person's statements. Belief

31
component indicates the person's subjective probability about
the truthfulness of an object person's statements. Intentions
reflect the person's plans to behave in a trusting or
mistrusting way towards the object person. Though their
definition of trust is directly based on the tripartite model
of attitude, it is similar to the definitions proposed by
Barber (1983) and Lindskold (1978). All the definitions
indicate that there is belief element which is based on
objective assessment of an object person's truthfulness and
and an affective element which is subjective and based on
attributions regarding the object person's behavior in the
past.
Levels of Trust
Along with different expectations, one has to be
exacting in specifying the particular social relationship or
social system of reference (Barber 1975). What is regarded as
competence or fiduciary responsibility between a retail buyer
and a vendor's representative may be quite different from the
expectations about each other's organization. In other words,
it is imperative that the level at which trust operates
should be clearly specified. In organizational settings,
trust may operate at an interpersonal level or organizational
level or both. In certain exchange relationships,
interpersonal trust may play a dominant role while the role
of organizational trust may be minimal: in others, the roles
may be reversed.

32
Trust and Long-Term Relationships
Trust plays an important role in the development of
long-term relationships. At the most basic level, one party
has to undertake some actions before the other party and thus
must rely on the other party to honor its commitments. Thus,
any type of coordinative action by one party in a
relationship is open to exploitation. Through trust, parties
in a relationship develop the confidence that short-term
inequities in the relationship will be corrected and will
lead to long-term benefits (Kronman 1985).
Institutional economists' are concerned with market
failure due to opportunism (Williamson 1975). The greatest
potential for such opportunistic behavior is in long-term
relationships where the market based discipline is removed or
reduced by a lack of large numbers of competitive entities.
In such a noncompetitive situation, the hazards of
opportunistic behavior is greater because termination of an
exchange relationship cannot be easily achieved. In a
noncompetitive situation, opportunistic tendencies can
cripple efficient exchange because it often results in higher
profit to the party indulging in such behaviors. Williamson
argues that hazards of opportunism can be reduced by the use
of more administratively coordinated structures to govern
long-term relationships. An alternative approach suggested by
Ouchi (1980) identifies "clan" systems which rely on
attitudes and socialization to provide social restraints on

33
undesirable behavior such as opportunism. Following this
suggestion, one may argue that hazards of opportunistic
behavior in long-term relationships can be mitigated or
removed if a strong cooperative attitude such as trust
prevails.
Frazier, Spekman, and O'Neal (1988) indicate that a key
factor which contributes to the success of committed long¬
term relationships such as the JIT exchanges is the level of
trust between the supplier and the OEM. Trust is extremely
important because of the high transaction specific
investments committed to the relationship. In fact, Frazier
et al. argue that a high level of trust may exist even before
the supplier and OEM initiate the JIT exchange. Trust is
enhanced as tangible evidence of personal integrity
accumulates, promises are upheld and opportunistic behaviors
are forgone.
Consequences of Trust
1) Trust leads to high-risk coordinative behavior.
Coordinative behavior between parties in a exchange
relationship is necessary for reaching mutually acceptable
agreements (Pruitt 1981). Coordinative behavior can be
classified as high-risk, moderate - risk, and low-risk
depending on the amount of risk involved in various actions
(Pruitt 1981). According to Pruitt, high-risk coordinative
action will be taken by a negotiator only if the other
bargainer is trusted. Examples of high-risk coordinative

34
action would be a large concession that seeks a reciprocal
concession, a proposal for compromise, a unilateral tension-
reducing action, or statements about one's motives and
priorities. Normally, such high-risk coordinative actions
leave a party open to image loss (perception of the bargainer
as a person willing to concede more than necessary), position
loss (a position in which a bargainers cannot move back to
their initial position), information loss (bargainer's
statements about values, priorities, and limits used by the
other party for devising threats or positional commitments)
and loss of opportunity for competitive behavior (bargainer
aiming at cooperation will be inconsistent with competitive
behavior at a later stage). Trust encourages coordinative
actions by reducing the dangers of the four types of losses
described above. Position loss is reduced because the other
party is expected to concede in return. Image loss is reduced
as the behavior will not simply strengthen the other party's
determination. Information loss is reduced as the other party
is not expected to misuse information. Finally, loss of
competitive behavior does not play an important role as the
intention is to coordinate with the other party.
Thus trust encourages high-risk coordinate action by
reducing the dangers of image loss, position loss,
information loss, and loss of competitive behavior.
Successful high-risk coordinative action leads to a
heightened sense of trust which leads to more risk taking in
future exchanges.

35
2) Trust leads to effective problem solving. In spite of
the sparse evidence, trust seems to lead to effective problem
solving. In low-trust groups, Zand (1972) notes,
"interpersonal relationships interfere with and distort
perceptions of the problem. Energy and creativity are
diverted from finding comprehensive realistic solutions, and
members use the problem as an instrument to minimize their
vulnerability." Using a quasi - experimental design, Zand
demonstrated that subjects exposed to instructions including
high versus low levels of trust differ significantly in terms
of their behavior. Specifically, high trust led to more open
exchange of relevant ideas and feelings, greater
clarification of goals and problems, more extensive search
for alternative courses of action, increased sharing of
influence among all participants, greater satisfaction among
participants about their problem solving efforts, greater
motivation to implement decisions, and a feeling of
interpersonal closeness within groups. All these behaviors
enhanced problem solving of a group. Interestingly, Zand's
results were the same when data was gathered in two
independent ways: self-reports from subjects, and reports
from observers of group performance who had no inkling of the
experimental conditions. In other studies, Kee (1970) has
found that trust/suspicion are key moderators or determinants
of performance in experimental situations. His trust groups
reached agreement more quickly than suspicion groups.

36
Further, the suspicion groups were given to more threats and
lies than sharing of information.
3) Trust leads to cooperative behavior. A number of
researchers have found systematic relationship between
bargaining behavior and an individual's predisposition to
trust others. Based on a number of studies, it appears that
trusting bargainers behave more cooperatively than those who
are less trusting. Deutsch (1962) indicates that when
individuals choose to cooperate, they essentially place their
fate in the hands of others. This is a basic act of trust.
Gibb (1964) proposes that the concerns for controlling others
becomes relatively minor for trusting individuals. Such a
condition facilitates cooperation. Tedeschi, Hiester, and
Gahagan (1969) and Schlenker, Helm, and Tedeschi (1973) found
that individuals who trusted others behaved more
cooperatively in the Prisoner's Dilemma game than those who
were low in trust. Deutsch (1960) has also found support for
trust as a facilitator of cooperative behavior. He found that
subjects who had the goals of cooperative orientation behaved
more cooperatively than subjects who had a goal of being
competitive. Kimmel et al. (1980) found that under high
aspirations, high trust produced cooperative behavior in the
form of direct information exchange while low trust produced
distributive behavior in the form of indirect information
exchange. Similar results were found by Schurr and Ozanne
(1985) who found that under conditions of high toughness
(which is similar to the manipulation of aspirations in

37
Kimmel et al. study) high trust led to higher level of
agreements, fewer unreciprocated concessions, and fewer
distributive messages compared to a low trust condition.
In summary, low trust is an antecedent of distributive
behavior as it produces evasive, complaint, or aggressive
communications which conceal the true attitudes (Mellinger
1959) whereas high trust fosters integrative behavior,
especially in the form of self-disclosures about needs and
priorities (Kimmel et al. 1980). Thus, based on the empirical
evidence one can conclude that trust results in cooperative
behavior.
Power
For more than two decades the phenomena of power in
channels of distribution has been given regular empirical
attention in the marketing literature. Stern and El-Ansary
(1988) indicate that a major function of power is to specify
roles of the channel members for effective coordination
between parties.
Meaning of Power
Based on the numerous definitions of power, Stern and
El-Ansary (1988) conclude that power is the ability to get
another channel member to do what the latter would not have
otherwise done. A basis for this conceptualization of power
is the one offered by Schopler (1965) that suggests that a
channel member's (A) power over another (B) is the net

38
increase in the probability of B's enacting a behavior after
A has made an intervention, compared with the probability of
B's enacting the behavior in the absence of A's intervention.
In a marketing context, according to El-Ansary and Stern
(1972):
The power of a channel member is his/her ability to
control decision variables in the marketing
strategy of another member in a given channel at a
different level of distribution. For this control
to qualify as power, it should be different from
the influenced member's original level of control
over his own marketing strategy.(page 47)
The above definition will be used in this discussion. The
nature of power has been greatly illuminated by the works of
Emerson (1962) and French and Raven (1959).
Emerson has focussed on the relationship between power
and dependence. Power viewed from his viewpoint, is the
extent to which channel members depend on one another. The
more highly dependent A is on B, the more power B has over A.
According to Emerson (1962), the dependence of B on A is
directly proportional to B's motivational investment in goals
mediated by A, and inversely proportional to the availability
of those goals to B outside the A-B relationship.
Another approach to power-dependency issue is to view
dependency from a social exchange perspective. The social
exchange theory rests on two important constructs: comparison
level (CL) and comparison level for alternatives (CL alt.).
The comparison level is the quality of outcomes channel
members have come to expect from their relationships with
channel members of a specific kind on the basis of their past

39
and present experience and their knowledge of firms similar
to themselves. The outcomes obtained from a relationship,
compared against this standard, determine the attractiveness
of the relationship. The comparison level of alternatives (CL
alt) by contrast, is the average quality of outcomes channel
members can expect from the best alternative (resource or
vendor) to their present exchange relationship. As such,
comparison level for alternatives represents the lowest level
of outcomes a channel member will accept and still remain in
the relationship. The level of outcomes from the current
relationship compared to comparison level for alternatives
(CL alt.).determines the level of dependency of one party on
another. A much broader conceptualization of power as
dependency is provided by Heide and John (1988) . According to
Heide and John (1988), a channel member A is dependent on
channel member B if
1. Channel member A considers the outcomes from the
relationship as highly important.
2. The magnitude of channel member A's business with B is
very high.
3. Channel member A's outcome from the relationship is much
higher than the best other alternative.
4. There are fewer alternative sources of exchange available
to channel member A.
5. There are fewer potential sources of exchange available to
channel member A.

40
6. Channel member A has invested in high transaction specific
assets in the relationship.
Thus, more dependent channel member A is on B based on
these sources of dependence, greater is the power of B.
French and Raven (1959) added more specificity to the
notion of power by identifying the sources or bases of power.
According to French and Raven (1959), the sources of A's
power over B are based on
1. B's perception that A has the ability to mediate rewards
for B.
2. B's perception that A has the ability to mediate
punishments for B.
3. B's perception that A has the legitimate right to
prescribe behavior for B.
4. B's identification with A.
5. B's perception that A has some special knowledge or
expertness.
These power sources have been designated reward,
coercive, legitimate, referent, and expert power bases. The
greater the sources of power available to a channel member,
greater is the power of the channel member.
Gaski (1984) has pointed out that though there is
considerable amount of consensus among marketing researchers
that power is the ability to alter another party's behavior,
the measurement of power has focussed on actual alteration of
other's behavior. Therefore, in this discussion, power refers
to the potential or ability to change another's behavior

41
whereas exercised power refers to the actual use of such
power to alter behavior of channel members.
Consequences of Power: Some Experimental Results
U Prisoner's Dilemma (PD) Paradigm. The effect of power
asymmetry on bargaining effectiveness has been assessed in
the PD paradigm by varying the actual or perceived status of
the parties or by varying the experimental reward structure
or payoff matrices. In the manipulation of power through
status variation, the power each party believes he/she can or
entitled to exercise is varied. In the manipulation of power
through reward allocation, the initial allocation of
resources among parties is varied. Irrespective of the way
the power between parties is manipulated, the general
conclusion is that power asymmetry affects bargaining
effectiveness. In most PD games, the cooperative behavior is
measured by the number of cooperative moves made by the
party.
a) Status variations; Rekosh and Feigenbaum (1966) and Faley
and Tedeschi (1971) manipulated status in a PD game and had
subjects negotiate against an experimental confederate.
Rekosh and Feigenbaum (1966) found that subjects made
cooperative choices with greater frequency when playing
against a peer (with equal power) rather than a graduate
student (with high relative power). Faley and Tedeschi (1971)
also found that high status subjects behaved more
cooperatively when the other bargainer was also of high

42
status than low status; and low rank cadets behaved more
cooperatively when the other person was of a low status than
high status. These studies and others (cf. Rubin and Brown
1975) provide some evidence that equal power bargainers
behave more cooperatively (make more cooperative moves) than
those with unequal power.
b) Matrix variation: Most of the studies in this category
manipulate power by varying the matrix values in a PD game.
In these experiments, matrices in which outcomes to both
players are symmetrical were contrasted with those in which
outcomes favored one player over the another. In general, the
findings of these studies indicate that bargainers with equal
power behave more cooperatively (make cooperative moves with
greater frequency) than bargainers having unequal power.
c) Reward structure: In these experiments, power was
manipulated by differentially allocating initial resources
or control over the experimental situation. Aranoff and
Tedeschi (1968) awarded one member of a pair of subjects an
initial advantage of 25, 50, 100, or 500 points. It was found
that as the magnitude of the subject's advantage increased,
the frequency of mutually cooperative moves decreased.
2) Acme-Bolt trucking game. The support for the
proposition about the effect of power has also been obtained
in paradigms other than PD such as the Acme-bolt trucking
game. In a very famous experiment, Deutsch and Krauss (1960)
varied relative power by providing one member, neither
member, or both members with a gate. The possession of the

43
gate reflects the power as the party can control the outcomes
of the other party. The results indicated that the mean joint
outcomes and bargaining effectiveness was greater when the
bargainers had equal power (0 or 2 gates) than unequal power
(1 gate).2
3) Bilateral monopoly. Komorita and Barnes (1969) tested
the effects of power in a bilateral monopoly paradigm and
found that subject pairs with equal power reached agreements
more often, required fewer trials to do so, and made larger
concessions than those with unequal power. Further, numerous
other studies have indicated that bargainers with high power
relative to those of their partner tend to behave
manipulatively, and exploitatively, while those with low
power tend to behave submissively (see Rubin and Brown 1975
for studies relating to this).
In marketing, a few experiments have investigated the
effect of power asymmetry on negotiation process and
outcomes. The earliest experiment was a laboratory simulation
of manufacturer - retailer bargaining by Walker (1971). In this
experiment, the balanced power condition had negotiations
between one manufacturer and one retailer while the
unbalanced power condition had one manufacturer and two
retailers. Walker utilized this design to study the effects
of learning on bargaining behavior. When subjects negotiated
2 This conclusion is based on the comparison of mean joint
outcome at 0 and 2 gate levels with 1 gate level. However,
the mean joint outcome of 1 gate level was greater than 2
gate level.

44
over time they learned where a mutually acceptable agreement
was likely to occur and adjusted their offers in that
direction. As a result, they required fewer bids, tended to
yield less profit, and communicated less frequently in coming
to terms. Walker did not however, compare processes and
outcomes of bargaining in the asymmetric power setting with
bargaining in a balanced structure.
Dwyer and Walker (1981) extended this design to compare
the negotiation process and outcomes in a symmetrical power
distribution against an asymmetrical power distribution. They
concluded that bargainers who were more powerful made more
demanding initial bids, yielded less from their initial
positions, made fewer bids to obtain an acceptable agreement,
sent a larger proportion of demanding - threatening messages,
made higher individual profits and achieved agreements which
gave them disproportionately larger share of their group's
total profits. Further, the weak bargainers were less
favorably disposed towards their partners and were less
satisfied with their performance compared to bargainers in
the equal power condition.
Another study which investigates the effects of
symmetric and asymmetric power is by McAlister, Bazerman, and
Fader (1986) . The power of the channel members in this
experiment was manipulated by varying the number of buyers
and sellers in each of the four experimental markets, as well
as the maximum number of transactions the buyer and seller
could complete. For two of the markets there were equal

45
number of buyers and sellers, while in the other two markets
there were two sellers for every buyer- a situation of power
imbalance in the favor of buyer. Orthogonal to this
manipulation of power, power was also manipulated by the
number of transactions each channel member could complete,
providing a power advantage to the seller. Thus, one market
provided power imbalance in favor of seller, the other in
favor of buyer and the other two market situations
represented power balanced situations. This study found that
higher power channel members reached more profitable
agreements than lower power channel members. Further, channel
members with higher power were able to reach greater overall
profitability than lower power channel members. This
experiment also showed that dyads with equal power reached
more integrative agreements than dyads with unbalanced power.
This experiment found support for most of the conclusions
reached by Dwyer and Walker (1981).
4) Game theoretic approaches. A few marketing studies
have employed utility based theories for the prediction of
outcomes in a variety of bargaining situations. The most
prominent among them has been the use of Nash's (1950)
bargaining solution for the prediction of bargaining
outcomes. Nash's bargaining solution is an axiomatically
derived outcome oriented approach and its prediction focuses
on the Pareto-optimal subset. Neslin and Greenhalgh (1983)
using a modified form of Nash's equilibrium function found

46
differences in outcomes in dyads with asymmetrical power
compared to dyads with symmetrical power.
Consequences of Power: Field Studies
In spite of the large number of marketing field studies
focussing on power and conflict, not many studies have looked
at the consequences of power. The focus of most channel
research has been on investigating the relationship between
sources of power and power and the consequences of power. In
a distributive system of automobiles, Lusch (1976) has found
that coercive sources of power increased conflict while
noncoercive sources of power decreased conflict. Wilkinson
(1981) reported support for the same relationship but
suggested that the causal direction of relationship may be
erroneous. The relationship between power and satisfaction
was found to be dependent on whether the power was exercised
or not. Specifically, exercised power led to lower
satisfaction while unexercised power led to higher
satisfaction of the channel member who had lower power (Gaski
and Nevin 1985).
Expectations of Future Interactions
Several studies in social psychology have found that
buyers and sellers committed to future interactions tend to
behave differently compared to buyers and sellers not
expecting any future interactions. The prospect of future
negotiations may extend the bargainer's view of negotiations

47
beyond the immediate transaction and may imply a greater
weighting of the opponents outcomes than in a single period
negotiation.
Meaning of Expectation of Future Interactions
Expectations of future interaction is simply an
expectation on the part of bargainers that they would
interact with their opponent at a future point in time. In
spite of the simplicity of this construct there seems to be
some ambiguity in the usage of this construct. In fact, some
researchers have used a slightly different construct called
the expectation of cooperative future interaction (Ben-Yoav
and Pruitt 1984). They define expectation of cooperative
future interaction as the anticipation of working toward a
common goal with other party at a later point in time. It
should be noted that the expectation of cooperative future
interaction assumes certain level of cooperativeness or trust
between the parties. Although studies using both constructs
will be discussed here, it is necessary to keep in mind that
expectations of cooperative future interactions is probably a
function of high expectations of future interaction and high
trust.
Consequences of Expectations of Future Interaction
A number of studies seem to suggest that expectation of
future interactions with the other bargainer leads to
cooperative behavior. Slusher, Roering, and Rose (1974) had
subjects play a one trial PD game and led them to believe

48
that the game would continue for three more periods. Half of
the subjects were told that they would interact with the same
partner, while the other half were told that they would
interact with a different partner after each game. They found
that subjects who expected future interactions with their
partner behaved more cooperatively (made more cooperative
moves) than subjects who expected future interactions with a
different partner. In another experiment, Marlowe, Gergen,
and Doob (1966) had subjects play a 30 trial PD game. The
subjects were either led to expect that they would meet with
their partner after the game or they were given no such
expectation. It was found that subjects who anticipated
future interactions were less exploitative than those who did
not expect to meet the other partner in future. In direct
contrast, a PD experiment by Swingle (1969) found subjects
who did not expect future interaction behaved more
cooperatively than subjects who anticipated future
interactions.
This apparent inconsistency in results was resolved by
an experiment by Gruder (1969). In a bargaining experiment,
he led subjects to believe that the other bargainer was "fair
and reasonable" versus "exploitative and unreasonable". He
also manipulated the expectation of future interactions by
leading one group of subjects to expect future interactions
with the opponent while subjects in the other group did not
expect such an interaction. Gruder found support for Marlowe
et al. and Slusher et al., that subjects playing against a

49
fair and reasonable opponent and expecting future
interactions were more compromising and behaved cooperatively
than when the opponent was perceived as exploitative in spite
of a high expectation of future interaction.
It appears that expectation of future interaction leads
to cooperative behavior when the other party is perceived as
fair and reasonable and leads to greater competitive behavior
when the other is seen as competitive or exploitative.
Consequences of Expectation of Cooperative Future
Interactions
As indicated above, there is substantial evidence which
suggests that an expectation of cooperative future
interaction leads to cooperative behavior. Pallak and Heller
(1971) found that commitment to future interaction with a
cooperative partner encouraged the acceptance of influence
attempts by the partner. Hancock and Sorrentino (1980) found
that anticipation of future interaction with a group enhanced
the likelihood of conformity to the group norms when the
subject had received prior group support. Ben-Yoav and Pruitt
(1984) found that subjects who expected cooperative future
interactions reached higher integrative agreements when their
aspiration levels were high. In a family decision making
context, Corfmann and Lehmann (1987) found that spouses who
were more committed to the marital relationship exercised
less influence in group decisions. In a broader sense, a
negotiator who wishes to continue a relationship will be
concerned with the outcomes and satisfaction of an opponent

50
especially if the other is perceived as a cooperative
partner.
This suggests that expectations of future interaction is
not enough to obtain a cooperative behavior: the perception
of a bargaining opponent as fair and reasonable is also an
important factor.
Satisfaction
Robicheaux and El-Ansary (1975) suggest that
satisfaction is of fundamental importance in understanding
channel relationships. They propose that a channel member's
satisfaction with its relationship with another firm results
in higher productivity within the channel. Stern and Reve
(1980) adopt a similar perspective in their political economy
framework and indicate that channel member satisfaction
directly affects the internal efficiency with which the
channel operates. This suggests that satisfaction within a
channel relationship is an important construct. However, in a
bargaining context, it may be more important to focus on
satisfaction stemming from outcomes obtained by parties in
past encounters. To understand the construct of satisfaction,
both satisfaction with the entire relationship and
satisfaction with past negotiation outcomes are addressed.

51
Meaning of Satisfaction with a Relationship and its
Consequences
The earliest definition of satisfaction in a consumer
buying situation was offered by Howard and Sheth (1969).
According to them, consumer satisfaction was:
The buyer's cognitive state of being adequately or
inadequately rewarded in a buying situation for the
sacrifice s/he has undergone.(page 145)
Although this definition provides some basic idea of
satisfaction, it fails to elaborate on the domain of the
construct. For example, it is not clear whether one should
include all the attributes of a product, or reaction to sales
assistance etc. and then measure satisfaction along all those
dimensions. Churchill (1979) has emphasized the need to
specify the domain of this construct accurately.
Following his suggestion, Ruekert and Churchill (1984) define
channel member satisfaction as:
the domain of all characteristics of the
relationship between a channel member and another
institution in the channel which the focal
organization finds rewarding, profitable,
instrumental or satisfying, (page 227)
Based on this definition, Ruekert and Churchill (1984)
uncovered four dimensions of channel member satisfaction.
These are
1. A product dimension, which reflects the demand for,
awareness of, and quality of the manufacturer's products.
2. A financial dimension, which captures the attractiveness
of the arrangement with respect to such matters as
intermediary margins and return on investment.

52
3. An assistance dimension, which assess how well the
manufacturer supports the intermediary with such aids as
cooperative advertising programs and point of purchase
displays.
4. A social interaction dimension which reflects how
satisfactorily the interactions between the manufacturer and
intermediary are handled, primarily through the sales
representative servicing the account.
Hunt and Nevin (1974) have found that channel member
satisfaction (with respect to all aspects of a relationship)
may lead to higher morale, greater cooperation, fewer
terminations of relationships, fewer individual class action
suits and reduced efforts to seek protective legislation.
Lusch (1976) found that channel member satisfaction leads to
reduced friction between parties, lower dysfunctional
conflict, and increased channel efficiency. Satisfaction has
also been found to be related to the exercise of power.
Specifically, use of noncoercive sources of power tends to
increase satisfaction while the use of coercive sources tends
to decrease satisfaction (Lusch 1976; Mitchie and Roering
1978; Stern and Reve 1980). These empirical studies clearly
indicate that channel member satisfaction plays a very
important role in channel performance.
Satisfaction with Past Outcomes and its Consequences
In the bargaining literature, the satisfaction/
dissatisfaction of a bargainer with past outcomes has been

53
found to affect the bargainer's behavior in future periods.
Satisfaction/ dissatisfaction with outcomes refers to a
bargainer's cognitive state of being adequately or
inadequately rewarded for its services in terms of outcomes.
Research on social motives has shown that bargainers
have different motives depending on whether they are ahead or
behind their opponent in terms of their outcomes (Messick and
Thorngate 1967; McClintock et al. 1973). In a study by
MacCrimmon (1973) it was found that subjects who were behind
acted in their own self-interest compared to subjects who-
were ahead. Corfman and Lehmann (1987) found that a
bargainer's decision history affected the outcomes in the
future periods. Specifically, individuals who were
dissatisfied with the outcomes of joint past decisions were
more influential in subsequent decisions. They indicate that
this may be due to either the increase in preference for
preferred outcomes or a desire to even the score in future
encounters. Siegel and Fouraker (1960) indicate that high
dissatisfaction may even lead a bargainer to maximize the
opponent's displeasure at the risk of own outcomes and
satisfaction.
In sum, dissatisfaction with past outcomes leads to a
tendency to maximize own gain in the next bargaining
encounter. However, these researchers have not explicitly
taken into account situations of power imbalance between two
parties. Specifically, does the extent of dissatisfaction

54
from outcomes differ across channel members having equal
power compared to channel members having unequal power.
Summary
Research in marketing, economics, social psychology and
contract law provide a basic framework in the
conceptualization of long-term relationships. Research in
these areas suggest that long-term relationships have
characteristics which are different from short-term exchanges
or hierarchical exchanges. Research also suggests that trust
between the two parties, the degree of power imbalance, the
expectations about future interactions and the degree of
satisfaction with the existing relationship play an important
role in the emergence of long-term relationships. Parties
involved in long-term relationships exhibit behaviors which
are substantially different from those having short-term
relationships along dimensions related to the focus of
exchanges, and the type of bargaining and communication
strategies adopted by the two parties. The next chapter
develops these ideas into a conceptual framework which looks
into the antecedents and consequences of a long-term
orientation.

CHAPTER 3
CONCEPTUAL FRAMEWORK
Overview
The focus of this dissertation is on negotiations
between channel members involved in a long-term relationship.
The conceptual framework identifies constructs which affect
the negotiation process and outcomes of such relationships.
In this framework, a set of antecedent factors affects
the motivational orientation of a channel member, which in
turn, is instrumental in determining the negotiation process
and outcomes of that channel member. The negotiation process
and outcomes determine the post-bargaining satisfaction of
the channel member. An overview of the conceptual framework
is presented in Figure 3-1.
Retailer's Expectation of Future Interactions
Recent research in channels of distribution (Heide and
John 1990; Anderson and Weitz 1989) has indicated that the
longevity of a channel relationship is dependent on a channel
member's perception of the likelihood that the relationship
will continue. Research in the area of channels of
distribution has found the notion of continuity or
expectation of future interactions to be an important
predictor of channel member behavior. This section looks at
55

56
the antecedents of a retailer's expectation of future
interactions.
Definition of Retailer's Expectation of Future Interactions
Expectation of future interactions is the perception of
bilateral expectation of continuity by a channel member. This
construct captures the probability or likelihood of such
future interactions and does not capture the attitude towards
such a relationship or the desire to conduct such a
relationship with the other channel member.
Antecedents of Retailer's Expectation of Future Interactions
Prior research has indicated that factors such as
transaction specific investments by channel members, the
degree of environmental uncertainty and power imbalance
significantly affect the expectation of future interactions
of a channel member (Heide and John 1990; Anderson and Weitz
1990). However, these studies have not looked at the effects
of all the above mentioned constructs together on the
expectations of future interactions. Further, the dimensions
of environmental uncertainty proposed in this study are
different from those proposed in the above mentioned studies
(Heide and John consider technological and volume
uncertainty). The purpose of this section is to develop a
framework which captures the retailer's expectation of future

57
interactions. The effect of various antecedents of retailer's
expectation of future interactions is shown in Figure 3-2.
Effect of decision making uncertainty on retailer's
expectation of future interactions
Decision making uncertainty is the degree to which
decision making units of an organization cannot anticipate or
accurately predict the environment (Pfeffer and Salancik
1978). For example, from a retailer's perspective, one source
of uncertainty is the degree to which demand cannot be
accurately predicted.
A major benefit of a long-term relationship is reducing
the uncertainty in the environment. A long-term relationship
along with other forms of strategic alliance offers an
innovative response to environmental uncertainty. Such long¬
term relationships result in greater access to information,
raw materials, markets, technology, capital and other sources
of expertise which allow firms to make decisions with less
uncertainty.
Decision making uncertainty of a retailer has both a
positive and negative impact on retailer's expectation of
future interactions. Decision making uncertainty makes it
difficult to specify the tasks that must be performed by the
vendor, the manner in which they have to be performed and the
level at which they have to be performed. Clearly, writing
and enforcing contracts are very difficult in such uncertain
environments. This is likely to lead to opportunistic

58
behavior by the vendor leading to the failure of market
mechanism. In such conditions, decision making uncertainty is
positively related to the development of long-term
relationships and thus, retailer's expectation of future
interactions. However, a long-term relationship may have
other difficulties when dealing with the high level of
complexity and turbulence in the environment. If a shift in
strategy is needed in such uncertain environments, it may be
easier for the retailer to negotiate with or change to a new
vendor than an entrenched vendor (Arrow 1984) .
Recently, Balakrishnan and Wernerfelt (1986), Heide and
John (1990), and Klein, Frazier, and Roth (1990) have
indicated that these divergent results may be better
explained by isolating the different dimensions of
uncertainty. As a result, two dimensions of environmental
uncertainty are introduced: environmental volatility and
diversity. These two dimensions were examined by Leblebici
and Salancik (1981) and found to have strong effects on the
decision processes of organizations.
Environmental volatility refers to the extent to which
market and demand changes are rapid. High volatility in a
retail industry would reflect rapid fluctuations in customer
demand, and inability to predict trends and future outcomes
in specific markets. When such volatile situations arise, an
organization needs to be flexible, thus, allowing the firm to
shift from permanent procedures to temporary and flexible

59
procedures. Therefore, high volatility in specific markets
should lead to low levels of future expectations.
Environmental diversity reflects the extent to which
there are multiple sources of uncertainty in the environment
(cf. Aldrich 1979). A retail market which includes multiple
users of products, multiple vendors, and many competitors
would capture this notion of environmental diversity. A firm
facing such a wide variety would have little difficulty
formulating effective strategic programs for each diverse
element by segmenting the different markets. This indicates
that environmental uncertainty faced by an organization need
not be experienced by an individual buyer dealing with a
specific market. This will encourage the retailer buyer to
develop channel structures that are relatively permanent.
Thus, environmental diversity will lead to long-term
relationships resulting in higher expectation of future
interactions with these vendors.
HI: Environmental volatility is negatively related to
retailer's expectations of future interactions.
H2: Environmental diversity is positively related to
retailer's expectations of future interactions.
Effect of transaction specific assets on retailer's
expectation of future interactions
Transaction specific assets are investments in durable
assets that are highly specialized to the exchange

60
relationship and are not easily redeployable and have little
salvage value in other relationships (Williamson 1981) .
Long-term relationships between retailers and vendors
are preserved by large transaction specific investments even
when the number of alternatives is large. The switching costs
imposed by transaction specific assets make short-term
exchanges hazardous (Treleven 1987). Opportunism by the
vendor or retailer is curbed by the long and sticky nature of
the exchange relationship through the transaction specific
assets. In such situations idiosyncratic investments lead to
"mutual hostage taking" and make termination of the
relationship an arduous task for both parties. Axelrod (1984)
suggests that due to transaction specific assets, there is an
expectation of future exchanges by parties which in itself
offers a credible capacity for retaliation if opportunism
exists In these situations, transaction specific investments
committed by channel members to the relationship create
strong exit barriers for both parties and thus, increase the
expectation of future interactions of channel members.
The basic argument is complicated by two distinct
sources of transaction specific assets in the retailing
context. In a retailer-vendor relationship each party might
invest in specific assets. Therefore, the effects are
proposed to be interactive. In other words, the relationship
between transaction specific investments and expectation of
future interactions would be positive only if both parties
invest significantly in the relationship. In all other

61
situations (e.g. transaction specific investment by retailer
is high while the transaction specific investment by vendor
is low), the effect of transaction specific investments on
retailer's expectation of future interactions is likely to be
negative.
H3: The level of transaction specific investments made
by a retailer and vendor is positively related to
retailer's expectation of future interactions only when
the retailer and vendor invest significantly in
transaction specific assets.
Effect of competition in vendor market on retailer's
expectation of future interactions
Competition in the vendor market reflects the number of
alternate vendors available to the retailer for a particular
product category (Anderson and Weitz 1986).
Economic theory suggests that market based exchanges are
more efficient when there are a large number of alternative
suppliers. A large base of suppliers protects the retailer
from hazards of opportunistic behavior by a vendor because
any such opportunistic behavior can be dealt by replacing the
current vendor with a new one. On the other hand, when the
number of alternative vendors is small, opportunism can
cripple the exchange by significantly elevating the
transaction costs. Thus, as the competition in vendor market
increases, the retailer is likely to prefer market based
exchanges. However, such an orientation may not feasible if
there are high switching costs involved in replacing one
vendor with another.

62
H4: Greater competition in the vendor market is
negatively related to retailer's expectation of future
interactions.
Effect of power imbalance on retailer's expectations of
future interactions
Power imbalance is the degree of asymmetry of power,
favorable or unfavorable, to the retailer in an exchange
relationship.
Power is the ability of one party to get the other party
to do something which the other party would not normally do
(Schopler 1965; Dahl 1964) . An example of use of such power
in a retailing context is a situation where the vendor is
forced to provide a full guarantee (a guarantee that all
unsold merchandise by retailer will be taken back by the
vendor) to a retailer. Such full guarantees are rarely
provided by most vendors.
The concept of power can also be viewed in terms of
dependency of one party on another. When a party A greatly
depends on party B to achieve its desired goals, party B is
considered more powerful (Emerson 1962). According to the
power-dependence theory, as the dependence of one party
(vendor) on another (retailer) increases, the power possessed
by the other party (retailer) is greater. Thus, a retailer's
power advantage arises when the vendor is more dependent on
the retailer than the retailer is on the vendor. In a
retailing context, the availability of alternate vendors
reduces a retailer's dependency on a vendor and thus
contributes to its power over the vendor. Conversely, the

63
availability of alternate retailers would contribute to the
vendor's power over the retailer.
It has been found in laboratory experiments that buyers
and sellers who possess a power advantage over their channel
partner take advantage of the asymmetrical power situation to
obtain higher outcomes (Dwyer and Walker 1981; McAlister,
Bazerman, and Fader 1986) . This effect has also been found in
studies using a survey methodology. Anderson and Narus (1984)
have found that channel members who possess a power advantage
concentrate on translating this power advantage into
asymmetrical outcomes leading to dissatisfaction of the low
power channel member. A retailer who has the power advantage
is less dependent on the vendor than the vendor is on the
retailer. In other words, the retailer has many other
alternatives which can provide him/her with outcomes
comparable to the current outcomes. As a result, the retailer
is likely to try to obtain maximum outcomes from the current
vendor by using the offers from alternative vendors as a
leverage in negotiations. Even if the current relationship is
terminated, the retailer with a power advantage can obtain
outcomes similar to those previously obtained. Thus, channel
relationships with a power imbalance are characterized by
less cooperation and greater conflict (Dwyer, Schurr, and Oh
1987; Robicheaux and El-Ansary 1975). Anderson and Weitz
(1989) found that unbalanced channel dyads where one partner
dominates the other are less stable. In such relationships,

64
trust between the channel members deteriorates leading to a
short-term view of the relationship.1
H5: Power imbalance in a retailer-vendor relationship
is negatively related to retailer's expectation of
future interactions.
Effect of Antecedents on Other Antecedents
The effects of various antecedents of retailer's
expectation of future interactions on other antecedents is
shown in Figure 3-2.
Effect of transaction specific assets on competition in
vendor market
Investment in transaction specific investments reduces
the number of vendors available to retailer as an exchange
partner. Transaction specific assets are idiosyncratic
investments tailored to the relationship between a specific
retailer and vendor, and these investments lose their value
when the relationship breaks down. In such situations, other
vendors cannot act as substitutes. Therefore, transaction
specific investments create exit barriers between retailers
and potential vendors and thus, reduce the number of
substitutes available to the retailer.
1 Anderson and Weitz (1989) indicate that the effect of power
imbalance is more pronounced in conventional channels than in
administered channels such as franchising. In administered
channels, power imbalance is explicitly recognized by both
parties before a relationship begins. In a conventional
channel, power imbalances develop during the course of a
relationship leading to high dissatisfaction. This suggests
that power imbalances may contribute to more unstable
relationships in conventional channels such as retailing.

65
H6: Investment in transaction specific assets by a
retailer is negatively related to the competition in
the vendor market.
Effect of competition in the vendor market on power imbalance
Viewed from a dependence perspective, power of a
retailer relative to vendor is the degree to which a vendor
is dependent on the retailer for obtaining scarce resources.
When there are many suppliers in the market each of whom can
provide similar resources to the retailer, the retailer has
more power compared to the vendor. The vendor is more
dependent on the retailer than the retailer is on the vendor.
Such asymmetric dependence situation creates power favorable
to one party.
H7: Competition in the vendor market is positively
related to power imbalance in the channel dyad.
Effect of transaction specific investments bv retailer and
vendor on power imbalance
Transaction specific investments are specialized
investments tailored to a relationship such that if the
relationship were to be terminated, the value of these assets
outside the relationship would be very low. Transaction
specific investments pose problems for channel members unless
channel partners also invest in reciprocating transaction
specific assets. If only one party, either the retailer or
vendor, invests in specific investments then that party is at
risk of losing the value of investment if the exchange is

66
terminated. The potential risk of losing specific investments
by the retailer or the vendor creates a power imbalance in
the relationship.
H8: Transaction specific investment by one party alone,
either the retailer or vendor, is positively related to
power imbalance. When both parties have no specific
investments or a lot of specific investments, the
specific investments are negatively related to power
imbalance.
Retailer's Long-Term Orientation
Pruitt and Kimmel (1977) after reviewing twenty years of
experimental gaming literature concluded that a critical
factor determining the behavior of a bargainer at a given
point in a negotiation game is the bargainer's short-term or
long-term perspective. Bargainers with a short-term
perspective are concerned only with the options and outcomes
of the current negotiation while bargainers with a long-term
perspective focus on achieving future goals and are concerned
with both current and future outcomes. According to their
review, short-term perspective leads to noncooperative
behavior by subjects in a Prisoner's Dilemma paradigm while
long-term perspective results in cooperative behavior. In
this dissertation, the term "orientation" has been used
instead of the term "perspective", though both terms have
similar meanings.
The difference between short-term and long-term
orientations can also be explained with respect to the nature

67
of interfirm exchange adopted by channel members. Firms with
a short-term orientation rely on efficiencies of market
exchanges to maximize their profits during a negotiation
while firms with a long-term orientation rely on relational
exchanges to maximize their profits over a series of
negotiations. Relational exchanges obtain efficiencies
through joint synergies resulting from investment in, and
exploitation of idiosyncratic assets and risk sharing. Both
orientations have the ultimate objective of maximizing the
outcomes obtained by channel members, and do not imply any
altruistic motives on the part of channel members.
Both long-term and short-term orientations are
conceptualized in this dissertation as polar opposites on a
single dimension. As a result, short-term orientation is
negatively correlated with long-term orientation. In other
words, an increase in short-term orientation will decrease
the long-term orientation of a channel member. For expository
clarity, the long-term - short-term continuum will be
referred to as the degree of long-term orientation. Since the
focus of this dissertation is on the retailer, all hypotheses
will be presented from the retailer's viewpoint. However, a
priori there is no clear case for these hypotheses to differ
when viewed from a vendor's viewpoint.
It is important to note that long-term orientation
reflects the desire or the attitude of the retailer towards
having a long-term relationship. Retailer's expectations of

68
future interactions merely capture the probability of a
future interaction between the retailer and vendor.
Definition of Retailer's Long-Term Orientation
A retailer's long-term orientation is the degree to
which a retailer is concerned with future outcomes leading to
a goal of maximizing outcomes over a long period of time.
Antecedents of Retailer's Long-Term Orientation
A retailer's long-term orientation is affected by
economic, environmental and relationship factors. This
section explicates the effect of these factors on a
retailer's long-term orientation. The effect of various
antecedents on retailer's long-term orientation is shown in
Figure 3-3.
Effect of individual trust on retailer's long-term
orientation
Trust in an individual is a belief that an individual's
word or promise is reliable and that the individual will
fulfill obligations in an exchange relationship (Blau 1964;
Rotter 1967). This definition emphasizes the truthfulness
aspect of trust which Lindskold (1978) refers to as objective
credibility: an expectancy held by an individual that the
other person's word or written statement can be relied upon.
A second aspect of trust focuses on the motives of
individuals concerned. Vendors who are concerned about the

69
outcomes of a retailer along with their own will be trusted
to a greater extent than vendors who are solely interested in
their own welfare. It should be noted that the second type of
trust can exist even when the objective credibility of
vendors is less than perfect: vendors may not act the way
they say they will because of competing demands or situations
beyond their control. In other words, vendors will be trusted
if their actions are perceived as benevolent by the retailer
(Lindskold 1978). In this definition of trust, the focus is
on an individual's trust of the other person, an individual.
Retailer's long-term orientation is also affected by the
trust they have on vendor organization. Trust in a vendor
organization refers to the belief a retailer has that the
vendor organization will fulfill its obligations in an
exchange relationship.
Trust in an individual vendor or organization have
similar effects on retailer's long-term orientation. Trust
affects the long-term orientation of a retailer in three
ways: 1) trust reduces the chances of opportunistic behavior
by the vendor, 2) trust increases the confidence of the
retailer that short-term inequities will be resolved over a
long period, and 3) trust reduces the transaction costs in an
exchange relationship.
According to Williamson (1975; 1981), an
understanding of transaction costs is central to the study of
organizations. The transaction costs include the costs of
reaching an agreement satisfactory to both sides, adapting

70
the agreement to unanticipated contingencies, and enforcing
its terms. Due to bounded rationality and the costs of
writing, negotiating and implementing a contract, a
comprehensive contract involving a long-term relationship is
not possible. At best, only incomplete contracting can be
achieved. Williamson (1981) argues that such incomplete
contracts are feasible only if there is mutual trust between
parties. Incomplete contracting in a trusting relationship
means that, the two parties agree to adapt to unanticipated
contingencies in a mutually profitable manner. In such
trusting relationships, retailers and vendors are likely to
respond to inequities through solutions over the long-run
instead of responding to inequities through opportunistic
behaviors. This suggests that trust acts as a dampening
mechanism of opportunistic behavior in an exchange
relationship. Thus, when trust exists, long-term
idiosyncratic investments can be made with limited risk
because the channel members will refrain from using their
power to renege on contracts or use a shift in circumstances
to obtain profits in their favor (Lorentz 1988). Further,
trusting relationships are likely to have lower transaction
costs as incomplete contracts are sufficient for running the
exchange relationship. In summary, trust reduces the
opportunistic behavior by vendor, lowers transaction costs in
an exchange relationship and increases the long-term
investment of the vendor.

71
H9: Trust in an individual vendor is positively related
to retailer's long-term orientation.
H10: Trust in vendor organization is positively related
to retailer's long-term orientation.
Effect of retailer's dissatisfaction with past outcomes and
retailer's long-term orientation
A retailer's dissatisfaction with past outcomes reflects
a cognitive state of feeling inadequately rewarded for the
past activities concerning the relationship (Howard and Sheth
1969). These activities in a channel of distribution refer to
the product (satisfaction with product quality), financial
(satisfaction with gross margin, credit policies), assistance
(satisfaction with promotional assistance), and social
interaction (satisfaction with vendor's representative)
dimensions of the relationship (Ruekert and Churchill 1984) .
Research in the area of family decision making has
indicated that a dyad's decision history, i.e the outcome in
previous periods affects the current outcomes (Corfman and
Lehmann 1987). Losses in the past periods increase the desire
to even the score in current and future exchanges by
enhancing the strength of preferred outcomes. This is similar
to Kelly and Thibaut's (1978) work where the outcomes
themselves describe the "satisfactoriness" of the exchanges.
In other words, subjects who are dissatisfied due to lower
outcomes in the past are likely to equalize gains over future
periods (Corfmann and Lehmann 1987). In a study by MacCrimmon
(1973) subjects cared for their own outcomes when they were

72
behind but were concerned with the outcomes of their partners
along with their own when they were ahead. These studies
indicate that the focus of a bargainer shifts to immediate or
short-term gains when he/she is dissatisfied with past
outcomes.
Equity frameworks, on the other hand propose an
intervening "equity/inequity" construct which determines the
satisfactoriness of outcomes. In other words, outcomes drive
the perceptions of equity or inequity, leading to
satisfaction or dissatisfaction with outcomes. Equity theory
indicates that dissatisfaction with past outcomes due to
inequities in exchange will result in distress. Individuals
in distress will try to restore the equity in the
relationship by emphasizing their own outcomes in future
periods. This suggests that retail buyers who perceive
inequity in past negotiation encounters are likely to be
dissatisfied leading to a short-term view of their
relationship.
Hll: A retailer's dissatisfaction with past outcomes is
negatively related to the retailer's long-term
orientation.
Effect of vendor's long-term orientation on retailer's long¬
term orientation
Vendor's long-term orientation is the degree to which a
retailer perceives that a vendor is interested in developing
a long-term relationship with the retailer. Vendor's long-

73
term orientation reflects the degree to which the vendor
focuses on future outcomes rather than current outcomes
alone.
An increase in vendor's long-term orientation, indicates
greater commitment of the vendor to continue and build the
relationship. As Dwyer, Schurr, and Oh (1987) point out that
relationships that are committed, are aware of alternatives
but do not indulge in continuous and frenetic testing of the
commitment to each other. A long-term oriented vendor
provides high and consistent inputs to the relationship, and
considers the relationship durable resulting in reduced risks
and higher efficiency for the retailer.
H12: Vendor's long-term orientation is positively
related to retailer's long-term orientation.
Effect of retailer's expectations of future interactions on
retailer's long-term orientation
Research in Prisoner's Dilemma paradigm (Pruitt and
Kimmel 1977) has indicated that bargainers who expected
future interactions with their partner behaved more
cooperatively than bargainers who did not expect future
interactions. The implication of this result is that a
anticipation of working with the other party changes the
attitudes and behaviors of parties involved. Marlowe, Gergen
and Doob (1966) have shown that expectation of future
interactions encouraged the subjects to be less exploitative
to their opponents. However, Gruder (1969) found that

74
subjects in a PD experiment behaved cooperatively towards the
other party only if the other party was perceived as fair and
reasonable rather than being exploitative. This suggests that
retailer's expectation of future interactions will lead to a
long-term orientation only when the vendor is perceived as
fair and reasonable both which are elements of trust.
H13: A retailer's expectation of future interactions is
positively related to retailer's long-term orientation
under high levels of trust in vendor's representative.
H14: A retailer's expectation of future interactions is
positively related to retailer's long-term orientation
under high levels of trust in vendor organization.
Effect of dependence on retailer's long-term orientation
Dependence of a firm A on B is defined as the degree to
which outcomes obtained by firm A exceed outcomes available
to A from the best alternative, outcomes obtained by A from
the relationship are highly valued, and A has few alternative
sources or potential sources of exchange (Heide and John
1988)
One of the sources of dependence is the extent of
investment by a channel member in assets specific to the
relationship. A retailer who has invested in TSA has created
barriers to exit from such a relationship. These
relationships with high switching costs result in an
inability of the retailer to replace the vendor easily.
Following Williamson (1979,1985), and Klein, Crawford,
and Alcian (1978), one way to protect assets from hazards of

75
opportunism is to vertically integrate. In a retailing
context, vertical integration is quite often not a feasible
solution (Heide and John 1988). The only other alternative is
to develop long-term relationships with vendors. Long-term
relationships with vendors who are less dependent on the
retailer, could safeguard assets and reduce dependence over
the long-run. A retailer who increases the transaction
specific investment in a relationship and translates this
investment into outcomes which are superior to the best
alternative a vendor has, can increase the vendor's
dependence on the retailer. This could result in a more
balanced dependence between the retailer and vendor.
In contrast, as the dependence of a vendor on retailer
increases, the retailer has the opportunity to deny long-term
contracts with vendor which could be used as a safeguard by
the vendor against retailer's opportunistic behavior. In
other words, since the risk associated with transaction
specific assets is vendor's, retailers are less likely to be
motivated to develop a long-term relationship.
H15: Dependence of a retailer on vendor is positively
related to retailer's long-term orientation.
H16: Dependence of a vendor on retailer is negatively
related to retailer's long-term orientation.
Effect of Antecedents on Other Antecedents
The effects of various antecedents of retailer's long¬
term orientation on other antecedents is shown in Figures 3-3
and 3 - 4.

76
Effect of dissatisfaction with past outcomes on vendor's
trustworthiness
Research in equity theory and social exchange theory
suggests that inequitable outcomes in the past affect
behavior in subsequent periods (Adams 1965; Kelly and Thibaut
1978). In a continuing relationship, dissatisfaction with
past outcomes indicates an inequity in social exchange.
According to equity theory, when individuals find themselves
participating in inequitable relationships, they feel
distress. This distress results in physiological and
psychological arousal such as anger, resentment, and
mistrust. Such social inequity which leaves one member at a
disadvantage in an exchange relationship affects their
feelings towards the other party. Specifically, feelings such
as resentment, anger, and being taken advantage of, generated
due to dissatisfaction result in suspicion and mistrust of
the channel partner. In a retailing environment, a retailer
who perceives inequity in a relationship due to poor outcomes
in the past will be dissatisfied and is likely to view the
vendor, both as an individual and as an organization to be
untrustworthy and exploitative. Although, the retailer may
still continue such a relationship, there is likely to be a
reduced level of trust in the vendor.2
2 Zand (1971) indicates that even though a relationship can
continue when there is a lack of trust between the parties,
such a mistrustful climate introduces social uncertainty
where each party's behavior is viewed with circumspection.
This often leads to a breakdown of relationships.

77
H17: A retailer's dissatisfaction with past outcomes is
negatively related to retailer's trust in vendor's
representative.
H18: A retailer's dissatisfaction with past outcomes is
negatively related to retailer's trust in vendor
organization.
Effect of power imbalance on trust
When one party possesses a high leverage over the other
party, the stronger party becomes manipulative and
exploitative. This leads the weaker party to mistrust the
intentions of the stronger party. Anderson and Weitz (1989)
found that power imbalance significantly decreased trust
between dyads in conventional channels. In a retailing
context, a retailer who has lower power than vendor is likely
to mistrust the vendor. Conversely, a vendor who has lower
power compared to retailer is likely to mistrust the
intentions of the stronger retailer, resulting in lower
trust. Retail buyers who perceive a power imbalance against
them, are likely to attribute their mistrust to both the
organization and the individuals representing the
organization.
H19: Power imbalance favoring the vendor in a retailer
vendor relationship is negatively to retailer's trust
in vendor's representative.
H20: Power imbalance favoring the vendor in a retailer
vendor relationship is negatively related to retailer's
trust in vendor organization.

78
Effect of transaction specific investments on dependence
Transaction specific assets create exchange difficulties
for the investing party (Heide and John 1988). These
difficulties arise because an opportunistic exchange partner
could appropriate some fraction of the value of the immobile
assets. This happens as the investing party can no longer
rely on the threat to switch to another supplier or vendor.
In other words, switching costs due to immobile transaction
specific assets prevent credible threats. Therefore, the
extent of dependence is a function of the magnitude of the
specific assets.
H21: Transaction specific investments by a retailer are
positively related to the dependence of a retailer on
vendor.
H22: Transaction specific investments by a vendor are
positively related to the dependence of a vendor on
retailer.
Effect of transaction specific investments by a vendor on
vendor's long-term orientation
Transaction specific assets by a vendor are immobile
assets that increase the dependence of the vendor on a
retailer. Although, the specific assets by vendor could lead
to opportunistic behavior by retailer, they also send signals
to the retailer regarding the commitment of a vendor to the
relationship. Such assets allow retailers to plan
strategically without worrying about a vendor switching to
other retailers. In other words, the risk encountered by

79
retailer in that relationship is reduced, thus increasing the
possibility of a long-term relationship.
H22: Transaction specific investments by a vendor are
positively related to the vendor's long-term
orientation.
Effects of vendor's long-term orientation on retailer's trust
in vendor organization and its representative
Vendor's long-term orientation supports increased levels
of trust for several reasons. First, when the vendor is long¬
term oriented, retailers believe that they can correct short¬
term inequities. Further, when the association is perceived
to be more durable, each party is more confident that the
other will fulfill the obligations faithfully. Essentially,
vendor's long-term orientation (e.g. through increased TSI)
increases the likelihood of good behavior on the part of
vendor, and reduces the possibility of opportunistic
behavior.
H24: Vendor's long-term orientation is positively
related to retailer's trust in vendor's representative.
H25: Vendor's long-term orientation is positively
related to retailer's trust in vendor organization.
Summary
Long-term orientation of a retailer is affected by
retailer's expectations of future interactions, the
perception of vendor's long-term orientation, the degree of
individual and organizational trust, and the extent of

80
perceived dependence of the retailer and vendor on each
other.
Retailer's Initial Offer
Overview
A bargainer's initial offer often sets the tone of
negotiation between two parties. An initial offer conveys
important information about bargainers perception of their
adversary, and their own aspirations and limits. For example,
a high initial offer often sends a signal to the opponent
that the bargainer has high aspirations. In some cases, it
also signals a lack of trust between the bargainer and
opponent. Therefore, the initial offer is an important part
of the bargaining process.
Definition of Retailer's Initial Offer
The initial offer is the benefits a retailer would
receive if his/her first offer was accepted by the vendor.
The initial offer made by retailers is a function of their
aspiration level.
Aspiration level is the level of benefit sought by a
retailer during a specific negotiation encounter (Pruitt
1981) . Aspiration level is the expectation or goal of a
retailer for the current negotiation on various issues.
Pruitt (1981) indicates that negotiators make high initial

81
offers to protect their aspiration levels. This stems from a
fear of position loss. Once negotiators make initial offers
closer to their aspiration levels, it is difficult for them
to increase their offers during the negotiation without
losing face to their opponents. As a result, to achieve their
true aspiration levels, negotiators find it necessary to
conceal their aspirations by making initial offers which are
high and then trading concessions from this high initial
offer level. Experimental evidence has shown that higher
aspiration levels produce higher initial offers (Hammer and
Harnett 1975; Yukl 1974).
Antecedents of Retailer's Initial Offer Relative to the
Retailer's own Aspiration Level
Retailer's initial offer (relative to own aspiration
level) depends on whether the retailer or the vendor makes
the initial offer. Since, the model under the two situations
is different, both are discussed separately. The two models
are depicted in Figure 3-5.
1) Retailer makes initial offer
Effect of retailer's long-term orientation on retailer's
initial offer. The long-term orientation of a retailer
affects their initial offer. Retailers who are long-term
oriented consider the negotiation between parties not as a
single episode but as a continuous series of interactions.
Retailers having such a view of the relationship, are not

82
overtly concerned about position loss (loss due to the
discovery of true aspiration level by the other party) and
image loss (loss due to the discovery of limits). Even if
moderate initial offers result in short-term inequities, the
retailers are confident that such inequities will balance out
in the long run. Long-term oriented retailers behave
responsively towards the vendors and expect similar response
from the vendor. Retailers having a long-term orientation
tend to be truthful about their aspiration levels, and hence
make initial offers which are closer to their aspiration
level (Pruitt 1981) .
A study by Schoeninger and Wood (19&9) found that
intimate couples exchanged truthful information about
aspirations, and adopted problem solving approach. In
contrast, stranger dyads started out with high initial
demands, and made small concessions from this high initial
demand.
H26: Retailer's long-term orientation is negatively
related to the retailer's initial offer (relative to
own aspiration level).
Effect of vendor's long-term orientation on retailer's
initial offer. Vendor's long-term orientation indicates a
commitment on the part of vendor towards developing a long¬
term relationship. Retailers who perceive the vendor to be
long-term oriented, are confident that any short-term
inequity created due to an initial offer closer to their
aspiration levels will not have long-term consequences and
will be resolved over future time periods. In other words,

83
retailers who consider the vendor long-term oriented are
likely to take more risks by being honest about their
aspiration levels, resulting in initial offers close to their
aspiration levels.
H27: Vendor's long-term orientation is negatively
related to retailer's initial offer (compared to
retailer's aspiration level).
2) Vendor makes initial offer
Effect of vendor's initial offer on retailer's initial
offer. Research in negotiations indicates that bargainers'
initial offers are affected by their perception of the other
party's behavior. One common occurrence in negotiations is
strategy imitation, wherein a negotiator cooperates with the
other party when the other's actions are perceived as
cooperative and acts competitively when the other is seen as
competitive. Opponent's behavior that is seen as competitive
puts the target on the defensive and thus elicits a
competitive behavior is return (Kimmel et al. 1980) . A common
imitation behavior occurs when the vendor makes a tough
initial offer. When such an offer is perceived as competitive
it leads to a similar tough initial offer by the retailer.
Vendor's long-term orientation affects the attributions
a retailer makes regarding the vendor's initial offer. A
tough initial offer from a long-term oriented vendor is
likely to be attributed to external constraints rather than
the vendor's desire to make profits at the expense of the

84
retailer. On the other hand, a tough initial offer from a
short-term oriented vendor is likely to be attributed to a
desire to make profits at the expense of the retailer. In
such situations, retailer is likely to attribute the tough
initial offer as being exploitative and unfair. This is
likely to result in matching initial offer greater than the
retailer's true aspiration level.
H28: Vendor's initial offer is positively related to
retailer's initial offer (relative to retailer's own
aspiration level).
Effect on retailer's lona - term orientation on retailer's
initial offer. The rationale for this hypothesis is the same
as the one in H25. The only difference is that the vendor
makes the initial offer in this case.
H29: Retailer's long-term orientation is negatively
related to the retailer's initial offer (relative to
retailer's own aspiration level).
Effect of vendor's long-term orientation on vendor's
initial offer. A vendor's long-term orientation indicates a
commitment on the part of a vendor towards developing a long¬
term relationship. Retailers who perceive the vendor to be
long-term oriented are more likely to expect an initial offer
from a vendor close to the vendor's true aspiration level.
Retailers perceive long-term oriented vendors to be truthful
about their priorities and values. This is similar to
situations encountered in Just-in-time relationships where
both parties in a negotiation frankly exchange of priority
information (Frazier, Spekman, and O'Neal 1988).

85
H30: Vendor's long-term orientation is negatively
related to vendor's initial offer (relative to vendor's
own aspiration level).
Message Sending Behaviors and Disagreements
Research in negotiations has focussed on the importance
of initial offers in determining the negotiation process
(Pruitt 1981). Research has indicated that an extreme opening
bid or initial offer (indicating a tough strategy) can lead
to higher outcomes for the bargainer making the initial offer
(Siegel and Fouraker 1960; Bartos 1966, 1970). However, there
are limitations to such a conclusion. Typically, researchers
have found that excessive intransigence or toughness may lead
to impasse and lack of agreement. Others have argued that
when bargainers do not trust each other, a high initial offer
may be appropriate. High initial offers followed by a series
of concessions (referred to as heuristic trial and error
strategy) allow suspicious bargainers to infer each other's
priorities without direct disclosures. In other words, under
low trust concessions from a high initial offer help in
establishing confidence in each other and thus, lead to
integrative agreements (Tutzauer and Roloff 1988) .
In a relationship which is long-term, the role of
initial offer becomes critical. In contrast to the situation
described above, a high initial offer relative to bargainer's
own aspiration level indicates a desire to maximize own gain
at the expense of the other party. This initial offer
essentially devalues the trust imposed by bargainers in each

86
other and has serious repercussions on negotiation behaviors.
A high initial offer in a long-term relationship dictates the
message sending behavior of vendor, which in turn affects the
message sending behavior of the retailer. The message sending
behaviors of retailers and vendors determine the level of
disagreement between the two bargainers. The model is shown
in Figure 3-6.
Effect of retailer's initial offer on vendor's integrative
and distributive message sending behavior
Retailer's initial offer (relative to retailer's own
aspiration level) indicates the degree to- which the retailer
truthfully reveals the goals of the negotiation. As
retailer's initial offer far exceeds the aspiration level,
the vendor abandons information exchange in favor of
distributive messages which include threats, putdowns, and
fabricated persuasive arguments (Kimmel et al. 1980). On the
other hand, a retailer's initial offer which is close to the
retailer's aspiration level is likely to result in
information exchange about priorities and ways to solve
problems.
H31: Retailer's initial offer (relative to retailer's
own aspiration level) is positively related to vendor's
distributive message sending behavior.
H32: Retailer's initial offer (relative to retailer's
own aspiration level) is negatively related to vendor's
integrative message sending behavior.

87
Effect of vendor's integrative messages on retailer's
integrative message sending behavior
Research in communications in bargaining (Donohue 1981)
has indicated that message sending strategies follow an
action-reaction pattern. Donohue's (1981) analysis of
interaction sequences has shown that negotiators balance
integrative and distributive strategies and reciprocate only
integrative strategies. Evidence in labor-management
negotiations has indicated that both impasse and settlement
dyads reciprocated integrative tactics such as acceptances,
exploratory problem solving, and flexibility across
bargaining issues (Donohue, Diez, and Hamilton 1984; Putnam
and Jones 1982) . This suggests that an integrative message
sending behavior by vendor will result in reciprocal
integrative message sending behavior by retailer under all
conditions. In contrast, the reciprocity of distributive
messages depends on the type of relationship. Gottman's
(1979) work in marital conflict indicates that distressed
couples lock into a negative affect cycle, where distributive
messages get reciprocated by more distributive messages. On
the other hand, non-distressed couples follow a negative¬
positive or neutral sequence. Similar results are obtained by
Putnam and Jones (1982) in labor-management negotiations
where impasse dyads matched negative affect statements,
attacking arguments, threats and rejections for a series of
messages. This suggests that vendor's distributive messages

88
will result in distributive messages by retailer only if the
retailer is short-term oriented. A long-term oriented
retailer will respond to vendor's distributive messages in a
more integrative way.
H33: Vendor's integrative messages are positively
related to retailer's integrative messages.
H34: Vendor's distributive messages are positively
related to retailer's distributive messages only when
the retailer is short-term oriented.
Effect of message sending behaviors on the level of
disagreement between retailers and vendors
The construct "disagreement" reflects the degree to
which retailers and vendors disagree on various issues.
Research in channels of distribution has indicated that
effective use of integrative messages contributes to the
reduction of disagreements. Although the success of these
integrative messages depends on a trusting and cooperative
climate to be effective, empirical evidence suggests that
dealer and manufacturers who used such messages achieved
agreements on all major issues (the issues such as inventory
levels, participation in special programs, and advertising
expenditures). On the other hand, use of distributive
messages was negatively related to the agreements reached.
Integrative messages are successful in reducing the
level of disagreements because they inherently strive towards
integrating or maximizing the outcomes of both parties while

89
distributive messages try to maximize own outcomes to the
detriment of other party's interests.
H35: Distributive messages by retailer and vendor are
positively related to the level of disagreements.
H36: Integrative messages by retailer and vendor are
negatively related to the level of disagreements.
Conflict Resolution Strategies
Many researchers treat communication as an activity that
occurs during the manifest stage of conflict when a
confrontation is initiated through verbal and nonverbal
messages (Putnam and Folger 1988). But interactions processes
also lay the groundwork for confrontation when differences in
goals, values, and predispositions are realized through
communication. This indicates that communication plays an
essential role in defining the conflict in negotiations.
However, the role of communication is not limited to that.
Communication also plays an important role in the resolution
of conflict. Interaction patterns are essential elements of
conflict resolution as parties adjust to the changes conflict
produces, make sense of their experience, assess the impact
of conflict's impact on relationships, and try to resolve the
conflict episode. The communication patterns in the aftermath
or resolution stage are collectively referred to as conflict
resolution strategies. These conflict resolution strategies
are interaction patterns deliberately selected by parties in
conflict to achieve resolution.

90
Research in conflict resolution refers to five styles of
conflict management. These are competing, collaborating,
compromising, avoiding, and accommodating styles of conflict
management. The five different styles of conflict management
can be displayed on a two-dimensional map, with the
dimensions being concern for own outcome, and concern for
other party's outcome. The five conflict resolution styles
are shown in Figure 3-7. In spite of the five commonly
accepted styles for intraorganizational situations
(supervisor - subordinate relationships), research in buyer-
seller relationships (Day, Michaels, and Perdue 1988) has
indicated that a majority of purchasing agents used only
three styles: problem solving or collaborating, compromising,
and competing or aggressive. The results in these studies
indicate that both accommodative and avoidant styles seem to
have little relevance in buyer-seller negotiations.
Therefore, only competing, collaborating or problem solving,
and compromising styles of conflict management strategies
will be considered here.
Further, research in communications has shown that the
strategy adopted by bargainers depends on their orientation
towards each other (Pruitt 1981). The following sections
indicate how the retailer's long-term orientation along with
the perception of vendor's long-term orientation affect the
retailer's use of conflict resolution strategy. The
conceptual model is shown in Figure 3-8. All the hypotheses
focus on conflict resolution strategies used under high

91
disagreement situation. Under low disagreement or conflict,
the choice of one conflict resolution strategy over other
cannot be predicted. Figure 3-9 explicates the proposed
hypotheses.
Effect of retailer and vendor's long-term orientation on
retailer's use of problem solving strategy under high
disagreement
When retailer's and vendor's orientations towards
developing a long-term relationship is strong, it is easy for
both parties to obtain insights into each other's needs,
aspirations, values and priorities (Pruitt 1981). Pruitt
argues that when parties are concerned with each other's
needs, they tend to exchange information about priorities
which is instrumental in the development of integrative
solutions. Result for this hypothesis has been obtained in a
paper by Kimmel et al. (1980) who found that bargainers
having high limits and concerned with each other's needs
exchanged more information than bargainers solely interested
in self-gain. Based on these results, one could suggest that
high level of disagreements on issues would result in the
adoption of problem solving strategy if both parties were
interested in developing a long-term relationship. Problem
solving strategy has the potential for increasing the
benefits of both parties and would seem to be an attractive
strategy for bargainers having a long-term relationship.

92
H37: When both retailer and vendor are long-term
oriented, high level of disagreements lead to the
adoption of problem solving strategy.
Effect of retailer .and vendor's long-term orientation on
retailer's use of compromise strategy under high
disagreement
When retailers and vendors do not have similar
orientations (either a long or short-term orientation), it is
difficult for problem solving to emerge as the objectives and
aspirations of retailers and vendors are quite different.
Studies in experimental gaming (Komorita et al. 1968;
Lindskold and Benett 1973) have shown that a lower threat
capacity bargainer initiates cooperative moves in the form of
compromises on issues. Osgood (1962, 1966) and Lindskold
(1978) both suggest that unilateral initiatives by the weaker
party can engender the other party's trust and cooperation.
This strategy called the 'Graduated Reciprocation in Tension-
Reduction' details the steps of unilateral initiatives which
must be made to reduce conflict. In the present context, when
retailers and vendors have discrepant objectives, the channel
member interested in developing or continuing the
relationship needs to make compromises which often are in the
form of unilateral moves on negotiation issues.
H38: When a retailer is long-term oriented while the
vendor is short-term oriented, high level of
disagreements lead to the adoption of compromise
strategy by the retailer.

93
Effect of retailer and vendor's long-term orientation on
aggressive strategy under high disagreements
When both the retailer and vendor have short-term
orientations, i.e both parties have very little stake in the
relationship, use of an aggressive strategy by the retailer
seems to be most likely. Research in bargaining has suggested
that when parties have little stake in a continuing
relationship or have low trust, distributive tactics or
coercive behaviors result. Kimmel et al. (1980) and Carnevale
et al. (1981) have both indicated that high limits with low
concern for each other result in coercive tactics.
H39: When both the retailer and the vendor are short¬
term oriented, high level of disagreements lead to the
adoption of aggressive conflict resolution strategy by
retailer.
Retailer and Vendor Concessions
In a competitive environment such as in retailing,
buying organizations are keenly interested in lowering costs,
thus increasing the profits. Thus, a retailer's concessions
are the most important outcome of a negotiation from a
retailer's point of view. This section focuses on the effect
of different conflict resolution strategies on retailer's and
vendor's concessions. The conceptual model is shown in Figure
3-10.

94
Effect of retailer's use of problem solving strategy on
retailer's and vendor's concessions
Retailer's problem solving strategy is based on
exchanging information about the retailer's goals,
aspirations and priorities. Adoption of problem solving
conflict resolution strategy focuses on expanding the pie of
resources available to both parties. As such, retailer's
adoption of problem solving strategy will have a negative
effect on retailer's and vendor's concessions i.e both
parties will have to make fewer concessions.
H40: Retailer's problem solving strategy is negatively
related to both retailer's and vendor's concessions.
Effect of retailer's use of compromise strategy on retailer's
and vendor's concessions
Retailer's compromise strategy indicates that the
retailer is likely to make concessions on many issues.
Presumably, retailer's compromise strategy will result in
similar compromise by the vendor, and thus higher concessions
by the vendor. In other words, adoption of a compromise
strategy by retailer entails concessions by both parties on
various issues.
H41: Retailer's compromise strategy is positively
related to both retailer's and vendor's concessions.

95
Effect of retailer's aggressive strategies on retailer's and
vendor's concessions
Retailer's aggressive strategy indicates usage of
threats, phony arguments, and positional commitments to
elicit concessions from the vendor without making
reciprocatory concessions. Since an aggressive strategy is
based on maximizing self-gain at the expense of an opponent,
it is clear that a retailer's successful execution of an
aggressive strategy will result in low concessions by the
retailer and high concessions by the vendor.
H42: Retailer's aggressive problem solving strategy is
negatively related to retailer's concession but
positively related to vendor's concessions.
Satisfaction with the Negotiations
Research in the area of satisfaction has offered many
different paradigms, including expectancy disconfirmation
(Churchill and Suprenant 1982; Oliver 1980), norms (Woodruff,
Cadotte, and Jenkins 1983), attribution (Folkes 1984), and
equity/inequity (Oliver and Swan 1989) to explain the
antecedents and consequences of satisfaction. In a channel
context, the disconfirmation model seems to be the most
appropriate as it has been found to be an important predictor
of satisfaction in situations where a party's expectations
are critical (Anderson and Narus 1990). In the expectancy
disconfirmation model, disconfirmation is the degree to which
performance exceeds, meets, or falls short of one's

96
expectations. In a channel context, the evaluations regarding
performance would be based on comparison of current outcomes
with outcomes expected from the relationship based on
experience and knowledge.
A different models focuses on the notion of equity/
inequity in a relationship rather than expectancies regarding
the performance (Oliver and Swan 1989). In this framework,
the buyer or seller's satisfaction is a function of the
degree to which they obtain equitable rewards. In both these
models, the outcomes obtained from a relationship are a
strong predictor of satisfaction.
The conceptual model is shown in Figure 3-11.
Effect of retailer's and vendor's concessions on retailer's
satisfaction with the negotiations
Satisfaction with the negotiation is a positive
affective state resulting from the appraisal of all aspects
of a retailer's negotiation with a vendor. The affective
assessment is affected by the rational or objective
assessment of the outcomes through the concessions made by
the retailer and vendor. Although the concessions are not
based on outcomes relative to the expectations, nevertheless,
the objective outcomes of the negotiations in the form of
concessions will affect the satisfaction of the retailer.
Oliver and Swan (1989) have shown that outcomes from a
relationship are the strongest predictor of satisfaction
(though their framework finds this effect on mediating

97
variables such as preference and fairness dimensions of
equity, which then affect satisfaction).
H43: Retailer's concessions are negatively related to
retailer's satisfaction with the negotiation, while
vendor's concessions are positively related to
retailer's satisfaction with the negotiation.
Effect of retailer's use of problem solving, compromise, and
aggressive conflict resolution strategy on retailer's
satisfaction with the negotiations
A retailer's satisfaction with negotiation is a function
of the extent to which various conflict resolution strategies
have been used by the retailer in the negotiation. Previous
research in distribution channels has indicated that the use
of coercive strategies (aggressive strategy) is likely to be
viewed by associated channel members as exploitative (Frazier
and Summers 1986). Cadotte and Stern (1979) argue, that in
the face of coercion channel members are likely to become
more rigid in their views leading to more problems, and
little hope of eliminating the underlying causes of conflict.
Thus, the use distributive strategy is negatively related to
retailer's satisfaction with the negotiation process and
outcomes.
In contrast, when retailers use noncoercive strategies
such as problem solving or compromise, the vendor is likely
to perceive the retailer as being accommodative, responsive
to its concerns, and willing to work towards solving the
problem. Such problem solving and compromise strategies allow
retailers and vendors to focus on the core issues of conflict

98
resulting in meaningful exchange of information. Such a
positive atmosphere is likely to result in a positive
affective state, and thus, greater satisfaction.
H44: Retailer's use of aggressive strategy is negatively
related to retailer's satisfaction with the negotiations
while retailer's use of problem solving and compromise
strategies are positively related to retailer's
satisfaction with the negotiations.
Summary
The conceptual model discussed in sections 1 to 7
captures the entire negotiation process in a retail
bargaining situation. In sections one and two, the conceptual
model indicates that factors such as trust, satisfaction, and
expectation of future interactions affect retailer's long¬
term orientation. In sections three and four, the effects on
long-term orientation on initial offer and messages sent by
both parties is discussed. In section five, the effect of
such message sending behaviors on conflicts and conflict
resolution strategies is discussed. Finally, in section six
and seven, the relationship between conflict resolution
strategies and concessions and resulting satisfaction is
discussed.

ANTECEDENTS MOTIVATIONAL NEGOTIATION NEGOTIATION
ORIENTATION PROCESS OUTCOMES
v£>
Fig.3 -1: Overview of the Conceptual Framework

Fig 3-2: Antecedents of a Retailer's Expectation of Future Interactions
100

Fig. 3-3: Antecedents of a Retailer's Long-Term Orientation
101

102
Fig
3-4: Antecedents affecting other antecedents

103
a) Retailer makes the initial offer
b) Vendor makes the initial offer
Fig
3-5: Antecedents of a Retailer's Initial Offer

Fig 3-6: Antecedents of the Level of Disagreements Between Retailers and Vendors
104

Concern for one's own outcomes
105
â–º
Concern for other party's outcome
Fig. 3-7: Styles in Conflict Resolution

106
Fig. 3-8: Determinants of Retailer's Conflict Resolution
Strategy

Vendor's long-term orientation
107
Under conditions of high disagreement
c
o
-H
-u
C LOW
-H
o
e
S-l
o
•U
I
O'
c
o
w High
o
T3
c
>
Retailer's long-term orientation
Low
High
1
3
—
—
2
4
—
+
H37:
4 vs
Contrast
(1+2+3)/3
Dependent variable: Use of problem solving strategy
Low
High
Retailer's long-term orientation
Low
High
1
3
—
+
2
4
+
—
H38: Contrast
(2 + 3) /2 vs.
(1+4)/2
Dependent variable: Use of compromise strategy
Fig 3-9a: Hypotheses related to the Retailer's use of Problem
Solving and Compromise Conflict Resolution Strategies

Vendor’s long-term orientation
108
Under conditions of high disagreement
Retailer's long-term orientation
Low
Low
High
1
3
+
—
2
4
High
Dependent variable: Use of aggressive strategy
H39: Contrast 1 vs (2+3+4)/3
Fig 3-9b: Hypotheses related to the Retailer's use of
Aggressive Conflict Resolution Strategies

109
Fig. 3-10: Effect of Retailer's Conflict Resolution
Strategies on Retailer's and Vendor's Concessions

Fig. 3-11: Effect of Retailer's Conflict Resolution Strategies on Retailer's
and Vendor's Concessions and Retailer's Satisfaction with Negotiation
no

CHAPTER 4
METHODOLOGY
Overview
Retail buyers from six department stores and their
resources provided information on their relationship and a
major negotiation in which they were engaged. This chapter
deals with the methodology used for collecting data and
developing measures of constructs related to negotiations.
Section one covers issues dealing with research setting,
questionnaire development, and respondent solicitation.
Section two covers the development of measures.
Research Setting, Questionnaire Development, Respondent
Solicitation and Data Collection
Research Setting
The industry
The channel members examined in the empirical portion of
this dissertation are major department store chains and their
vendors. The department stores offer a wide variety of
products to customers including men's and women's clothing,
and accessories and thus provide an apt setting for studying
negotiations across a broad spectrum of products. The
merchandise is procured by a formal buying organization and
involves distinct buying personnel such as retail buyers, who
are responsible for buying specific product categories.
Ill

112
Although each retail buyer deals with 30-40 vendors, 5-10
vendors in each category contribute to approximately 80% of
their sales volume in that category. These vendors are
referred to as core vendors and retailers often, have long¬
term relationships with such vendors. In these buyer-vendor
relationships there are no intermediaries and negotiations
takes place with vendors or their sales representatives.
The negotiation between a buyer and vendor takes place
in a Retail Market. These retail markets are similar to trade
fairs, and are held in specific places all across United
States and abroad where vendors display their merchandise and
retail buyers place their orders. The retail markets are held
about 3-4 months in advance of the oncoming seasons
(Christmas, Pre-spring, Spring, Summer, Fall). Most of the
negotiations between vendors and retail buyers take place
either in retail markets or after the visit by retail buyers
to these retail markets.
The retailing industry is an apt setting for studying
the effect of short/long relationships on negotiation process
and outcomes. In a retail setting, negotiations regularly
occur between retail buyers and vendors and both parties are
often the sole decision makers in such negotiations. In
contrast to the industrial buying situation, the buying
center is composed of few individuals who are solely
responsible for the profitability of their accounts. The
small buying center eliminates the need to include other
members of the buying organization. Further, the retail

113
setting offers considerable variation in the nature of
relationships (short and long-term), merchandise, uncertainty
of market environments, and the degree of competition. A test
of the model proposed in this dissertation under such
circumstances would lead to strong credence to the
generalizability of the findings.
Unit of analysis
The ideal unit of analysis would be the retail buyer -
vendor dyad. However, there are significant problems in
collecting a large sample of matched pairs. Therefore, the
dissertation focuses only on individual level analysis from
the retail buyer's perspective.
Respondents
The respondents, retail buyers, are in a good position
to know the requirements of the firm for a product category.
The retail buyers have total control over a product category
and are fully responsible for the profitable performance of
that product line. Most retail buyers in major department
stores handle goods worth $15-$30 million. This indicates a
position of significant fiscal responsibility with respect to
the purchase of a product line. Thus, the responses on the
questionnaire capture the opinions and attitudes of key
decision makers in these negotiations.

114
Questionnaire Development
Pretesting
The first phase of the dissertation field work, consisted
of meeting with five buyers from a department store chain.1
It was evident during this meeting that issues considered in
this dissertation were of substantial interest to buyers in
this department store. The exploratory interviews also
indicated substantial variation in buyer-vendor
relationships.
A draft of a questionnaire was developed and sent to a
total of 14 buyers in two different department store chains.
The department store used in the exploratory phase mentioned
above was not included in this phase. Seven buyers from both
department stores were administered the questionnaire through
the contact person in the store's personal department. Each
buyer was asked to fill up the entire questionnaire and
during the process indicate if the questions were
"answerable, clear, and relevant." Subsequently, the
investigator set up personal interviews with 12 of the 14
buyers and went through the responses to the entire
questionnaire with each buyer. These interviews resulted in
several improvements to the questionnaire, as indicated in
the next section.
1 Though buyers from this department store chain were used in
the final data collection, care was taken to ensure that the
buyers who were interviewed as a part of the pretest were not
included in the final sample.

115
Pretest results
The major improvement from the pretest was the inclusion
of several negotiation issues which the investigator had not
considered originally. All the recommendations were included
to make the list of negotiation issues completely exhaustive.
This resulted in 14 major negotiation issues instead of 8.
Further, the pretest revealed that only some of the issues
were discussed during a typical negotiation. Hence, a
"Discussed/Not Discussed" column was added to identify the
issues which were discussed during a negotiation encounter.
Apart from this main recommendation, several other
suggestions were made by retail buyers. These suggestions led
to the deletion of irrelevant items, items that were vague,
awkwardly worded, or "too academic," questions which could
not be answered by the buyer, or questions which asked for
confidential information. Finally, wording was changed to a
retail parlance to improve the clarity of questions.
The questionnaire
The final form of the questionnaire had two separate
parts. The first part (see Appendix A) was 6 pages long and
required 20-25 minutes to complete while the second part (see
Appendix B) was 10 pages long and required 30-35 minutes to
complete. The first part of the questionnaire (which will be
referred to as Part A) dealt with retail buyers attitudes
towards developing a long-term relationship and antecedents
affecting such an orientation. The constructs included in

116
Part A were individual characteristics such as trust, and
long-term orientation, organizational constructs such as
transaction specific investments, and power imbalance and
environmental variables such as environmental uncertainty,
and degree of competition. The second part of the
questionnaire (which will be referred to as Part B) focused
on constructs related to the negotiation between a retail
buyer and vendor. Part B measured the retail buyer's
perception of initial offers, importance of various issues,
concessions, and conflict resolution strategies employed in
the entire negotiation. All questions were short and not
beyond the comprehension level of the retail buyer. The
questions were worded such that retail buyers were able to
provide candid and clear information. To encourage the buyers
to participate in this project, a cover letter was attached
(See Appendix A and B). This cover letter promised complete
confidentiality of information and as an incentive offered a
summary report on their relationship with vendors compared to
other buyers.
The questions were mainly of three types: fill in a
value, 7 point Likert Scale items anchored by strongly agree/
strongly disagree, and 7 point semantic differentials. The
first part of the questionnaire was grouped into five
sections: characteristics of the resource, nature of
relationship, orientation of the relationship, market
conditions, and buyer's profile. The second part of the
questionnaire was organized into six sections. These were

117
initial offers made by retailer and vendor, messages sent by
retailer and vendor during the negotiation, disagreements and
resolution of conflicts, concessions made by retailer and
vendor, negotiation outcomes and difficulty of the retailer
with recalling negotiations.
All retail buyers taking part in this survey were asked
to respond initially to Part A. In Part A, the respondents
had to choose a vendor based on a set of criteria (see the
next part for more details) and answer the questions with
respect to that particular vendor. After receiving the
completed first part, the retail buyers were mailed the
second part (Part B) a week before their actual market visit.
Retail buyers were instructed to complete Part B after their
market visit and culmination of negotiations with the vendor
mentioned in Part A. Part B was deliberately sent as close as
possible to the date of market visit to ensure complete
recall of all details of the negotiation. A similar
questionnaire was also sent to the vendor at the same time so
that both, the retail buyer and vendor would respond to the
same negotiation (this information was not utilized in this
dissertation).
Selection bias of respondents
A pretest of respondents (retail buyers) revealed that
most buyers were inclined to select long-term vendors in
answering Part A. Such a selection bias was likely to reduce
the variance associated with constructs such as long-term

118
orientation of a retail buyer. To reduce the selection bias
of respondents, and increase the variance associated with
constructs of interest (short/long - term orientation), four
different forms of Part A were created. A 2x2 matrix with two
levels of nature of relationship (short versus long) and two
levels of importance of product (moderately important versus
very important) was created. Each potential respondent was
randomly assigned a cell from the 2x2 matrix. For example, a
buyer was asked to choose a vendor with whom the buyer had a
short-term relationship and the product supplied by vendor
was a moderately important product to the retailer. Pretests
with retailers also revealed that some retail buyers dealt
only with long-term vendors. To accommodate such respondents,
an alternative criterion was provided along the one indicated
above. The instructions asked retail buyers to use the
alternative criterion only if they did not have a single
vendor who conformed to the first criterion.
Key informant bias
Phillips (1981) has criticized the use of key informants
to study questions about the firm and its environment.
Phillips has argued that since organizational characteristics
are distinct from individual characteristics, measurement of
organizational characteristics require research methods quite
different from that used for individuals. Phillips assessed
the reliability and validity of reports from multiple
informants with that obtained from key informants and found

119
that the key informant method failed to serve as a valid
indicator of organizational characteristics. As a result,
Phillips recommended using several informants at different
levels in the organization, constructing questions in a way
that required less demanding social judgments of the
informant and using questions that were less prone to
distortion by respondents.
The data collection method used here attempts to follow
the recommendations made by Phillips. Informants (Retail
buyers) were in complete control of all activities concerning
the particular vendor and took all the important decisions
and thus, had all the information necessary to respond to the
questionnaire accurately. In fact, it was clear based on
personal interviews and pretests that retail buyers were the
best possible informants for this study. All questions
focussing on the negotiation constructs used in Part B could
be best answered only by retail buyers. Therefore, the key
informant problem should not affect Part B. However, Part A
contained questions related to organizational and
environmental characteristics such power, dependence,
transaction specific investments, and environmental
uncertainty. Following Phillips' (1981) suggestion Part A was
pretested to ensure that questions dealing with
organizational characteristics were simple, easy to
understand and unambiguous. Incorporation of the second
solution suggested by Phillips to find multiple sources of
information was very difficult in this particular context.

120
Further, asking a Divisional Merchandise Manager to fill up a
host of questions related to environmental characteristics at
a product category level was found to be too burdensome and
impractical. Accordingly, the basic thrust of this study was
to minimize measurement error of the respondents rather than
using multiple sources of information.
Respondent Solicitation
To obtain confidential information from the retail
buyers, the retailer must agree to sponsor the study. Another
benefit of a sponsored study is that respondents (retail
buyer) are likely to take the study more seriously.
Participating retailers
Retailers participating in this project were sponsors of
the Center for Retailing Education and Research. The Center
for Retailing focuses on retail education and research on
various aspects of retailing. Retailers who were involved
with the Center for Retailing Education and Research and had
at least 30 buyers in their organization were asked to
participate in this study.
Dealing with the retailers
Before contacting the retailing firms, the researcher
obtained endorsement and support of the Center for Retailing
Education and Research at the University of Florida. The
Center for Retailing endorsed the project and allowed the use
of the Center's name in soliciting cooperation from retailing

121
firms. Eight retailing firms were sent a letter of
solicitation which included a brief description of the
project, its purpose, and a sample copy of the questionnaire
to be completed by retail buyers. These letters were sent to
the head of Recruitment/ College Relations / Personnel
Departments. A total of seven retailing firms agreed to
participate in this project.2 Each retailing firm
participating in this study was sent thirty questionnaires to
be distributed throughout the buying department. The
coordinators in each retailing firm were told to distribute
the questionnaires such that all the departments in the firm
were represented. Thus, a total of 180 questionnaires (Part
A) were sent to the retail buyers. However, within a month
one firm decided to back out of the project due to certain
external contingencies. The final sample consisted of six
retailing firms, to whom a total of 150 questionnaires were
sent.
Follow-up with retail buyers
Each retail buyer who responded to the first
questionnaire was sent a second questionnaire which focused
on negotiation between the retail buyer and vendor. The
second part was sent a week before the date of market visit
to ensure complete recall of the negotiation conducted during
the market visit. A similar questionnaire was sent to the
2 The firm which did not participate in the study cited a
strict policy of confidentiality of information about the
resources.

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vendor.
Most retail buyers responded to the first part within a
month. The average time of response was 29 days from the day
the first part of the questionnaire was sent. Within 15 days
of sending the first part, telephone follow-up was done to
encourage the retail buyers to respond quickly. The main
reasons for the delay were that the retail buyers were busy,
or their market visits were after 2 or 3 months.3
Data Collection
Response rate
Part A was sent to 150 retail buyers in six retail
department stores. A total of 124 responded indicating a
response rate of 82.67 %. This response rate compares
favorably with those reported in similar multifirm channel
studies. All the 124 respondents who participated in the
first phase were sent the second questionnaire. A total of
104 retail buyers responded to Part B indicating a response
rate of 83.87 %.4 Part B also contained self-report scales on
a respondent's difficulty with recalling information about
3 Retail buyers were instructed to fill Part A about 2-3
weeks before they went to retail market. This was done to
ensure that the retail buyer described the relationship with
a vendor with whom the retail buyer was going to negotiate in
a retail market.
4 The response rate would be 69.33% if the number of
responses to Part B (104) were compared to the total number
of participating buyers in Part A (150) instead of comparing
it to the number of buyers who responded to Part A (124). The
response rate using 150 respondents instead of 124, is
clearly a conservative estimate of the response rate for Part
B.

123
the negotiation process and outcomes. All respondents who
averaged less than 4 on a 7 point scale were eliminated. This
resulted in the elimination of 4 out of the 104
questionnaires, resulting in a sample size of 100 for the
second part. Clearly, most of the respondents were able to
recall their negotiations with vendors.
The number of respondents in each cell of the 2X2 matrix
for Part A and Part B in terms of the nature of their
relationship and the importance of the product is shown in
Table 4-1.
Nonresponse bias
Nonresponse bias was assessed comparing the early and
late respondents as suggested by Armstrong and Overton
(1977). In part A 85% of the questionnaires were received
well before the last 15%. Two groups were formed based on
this criterion. The two groups were compared using t-tests.
No significant differences were found on a number of
variables such as number of vendors, experience with vendors,
and experience in retailing industry. Therefore, nonresponse
bias does not appear to be a significant issue. A stronger
test of nonresponse bias would have been to contact the
nonrespondents (26) and obtain some information on the
variables indicated above. The researcher attempted to
follow-up on nonrespondents but as a result of the high
turnover in the retailing industry, the follow-up was not
successful.

124
Development of Measures
Overview
Thirty constructs, each measured with multiple items
were measured in this study. The critical step in the
construct validation of these constructs involves the
assessment of internal consistency and unidimensionality.
As a first step, the use of item-total correlations in
the construction of unidimensional scales has long been
advocated (Nunnally 1978; Churchill 1979). Often, items
having a correlation of less than 0.40 were excluded from
further analysis. However, as Gebring and Anderson (1988)
point out that an item-total analysis may fail to
discriminate between sets of indicators that represent
different, though correlated factors.
As a result, the first step used in item purification
and assessment of unidimensionality was an exploratory factor
analysis.5 This involved factor analyzing a set of items
through principal component analysis to obtain preliminary
assessment of dimensionality of a construct. If the
exploratory factor analysis indicated a single factor, all
items whose factor scores were greater than 0.5 were
retained. However, if multiple factors were obtained from the
5 Exploratory factor analysis will be referred to as EFA and
confirmatory factor analysis will be referred to as CFA in
all future references to these issues.

125
PCA, the factors were rotated using Varimax procedure to
obtain the best factor pattern. Once again, all items either
loading on more than one dimension or having a factor loading
of less than 0.4 were eliminated from subsequent analysis.
The items obtained from the exploratory factor analysis were
further subjected to a confirmatory factor analysis (CFA)
using LISREL 7 (Joreskog and Sorbom 1985). A single-factor
representation was used for each set of congeneric items.
Those items which showed adequate fit with the construct were
used for further analysis. As a last step, all the items
remaining from the CFA procedure were checked for overall
reliability by calculating a reliability coefficient such as
coefficient alpha.
Non - negotiation Constructs
Dependence of a retailer on vendor (DEPROV)
The dependence of a retailer on vendor captures the
extent to which a retailer is dependent on the vendor to
obtain certain resources or outcomes which the retailer
cannot obtain elsewhere (Gaski 1984). The items of this
construct focus on the extent to which the retailer is
dependent on vendor, considers the vendor an important part
of business, finds the vendor difficult to replace, and has
difficulty in making up sales volume if the vendor was
replaced.

126
Initially, a set of 12 items were proposed to capture
this construct. The first step involved doing EFA on the 12
items purported to capture this construct along with items
representing dependence of vendor on retailer (DEPVOR) and
power imbalance (PIMB).6 The PCA revealed three distinct
factors. The 12 items were now subjected to EFA with Varimax
rotation. The resulting factor pattern resulted in three
items being discarded due to poor loadings on the first
dimension, which represented DEPROV. The 9 remaining items
from were subjected to a CFA by using LISREL 7. One item from
the 9 was associated with high modification index and
respecification of model eliminated this item. All the 8
items were significantly different from zero as indicated by
individual t-values. After the acceptance of an adequate
LISREL model for this item set, its reliability was
calculated. The coefficient alpha of 0.944 for this measure
indicated high reliability. Table 4-1 indicates the items
used to measure the construct.
Dependence of a vendor on retailer (DEPVOR)
This scale is similar to the previous one and captures
the dependence of a vendor on retailer as perceived by the
retailer.
6 In the EFA and subsequent CFA, constructs which were
conceptually related but distinct were used. Although this
results in a strong test of convergent and discriminant
validity, it eliminates items which might represent more than
one construct. In this situation, power imbalance, dependence
of retailer on vendor and dependence of vendor on retailer
were considered to be conceptually related constructs.

127
A set of 6 items were proposed to capture this
construct. The first step involved doing a EFA on the 6 items
along with items representing dependence of retailer on
vendor (DEPROV) and power imbalance (PIMB). As indicated
earlier, the EFA resulted in three distinct factors. The
resulting Varimax rotated factor pattern resulted in three
items being discarded due to poor loadings on the second
dimension, which represented DEPVOR. The 3 remaining items
were subjected to a CFA by using LISREL 7. One item from the
3 was associated with high modification index and
respecification of model eliminated this item. The remaining
2 items were significantly different from zero as indicated
by individual t-values. After the acceptance of an adequate
LISREL model for this item set, its reliability was
calculated. The coefficient alpha of 0.55 for this measure
indicates reasonable reliability. Table 4-2 indicates the
items used to measure this construct.
Power imbalance (PIMB)
Power imbalance is the degree to which a retailer has
more power compared to a vendor or vice versa. A high degree
of power imbalance indicates asymmetry in power between the
retailer and vendor.
Three items were initially used to measure this
construct. The Varimax rotated pattern obtained from EFA
indicated that all three items loaded significantly on the
third dimension i.e. power imbalance. The CFA using LISREL 7

128
indicated that only 2 out of the 3 items were significant as
indicated by t-values. The coefficient alpha for the 2 item
measure is 0.698 which is comparable to reliability obtained
for this measure in previous studies (Anderson and Weitz
1989). Table 4-3 describes the items used to measure this
construct.
Convergent and discriminant validity of dependence of
retailer on vendor (DEPROV), dependence of vendor on
retailer (DEPVOR), and power imbalance (PIMB)
The convergent validity of all the three constructs was
indicated by significant t-values associated with each item.
The convergent validity was confirmed by modification indices
of less than 5.0 for all the constrained parameters. Though
the chi-square statistics of the overall model was
significant7, the X^/df was less than 3.0 (2.19). Further,
other fit indices showed a reasonable fit of the data to the
model (Root mean square residual = 0.05, Goodness of fit =
0.83) .
The discriminant validity of this model was assessed by
comparing this model to a model which constrained the
correlation between the constructs to be 1.0. In other words,
the constructs were deemed to be conceptually the same. If
7 For the X2 to be a valid test statistic, observed variables
should have a multivariate normal distribution, the analysis
should be based on covariance matrix and the sample size
should be large. Most of these assumptions are not valid for
the present data set. Hence, X^ is used to reflect the
goodness of fit rather than as a test statistic. Higher X^
values indicate a bad fit while lower X^ values indicate a
good fit. A X^/df of less than 3.0 is considered a good fit.

129
the chi-squares from the two models were significantly
different, one would reject the null hypothesis that the
constructs were conceptually same. The chi-square difference
between the two models with 3 degrees of freedom was 32.22,
which was significant at 0.01 level indicating discriminant
validity.
Transaction specific investments by a retailer (TSIR)
This scale describes the investments made by the
retailer in physical assets, procedures, and people that are
tailored to their relationship with a particular vendor. This
is based on items developed by Anderson (1985).
Based on items developed by Anderson (1985), five items
were proposed. These five items along with the items for
transaction specific investments by vendor (TSIV) were
subjected to EFA. The EFA suggested a two factor model with
the first dimension representing the transaction specific
investment by retailer (TSIR). The EFA also resulted in the
elimination of 1 item whose loading was less than 0.4 in the
Varimax rotated factor solution. The next step involved CFA
on the remaining items. The CFA indicated that only 3 out of
the 4 items had significant t-values and low modification
indices. The reliability as indicated by coefficient alpha
was found to be 0.79. Table 4-4 indicates the items used for
measuring this construct.

130
Transaction specific investment bv a vendor (TSIV)
This scale is similar in format to the preceding one,
but it describes the investments made by a vendor in the
relationship.
Five items were proposed based on previous studies.
These five items along with the items for transaction
specific investments by retailer (TSIR) were subjected to
EFA. The EFA suggested a two factor model with the second
dimension representing the transaction specific investment by
vendor (TSIV). The next step involved CFA on the remaining
items. The CFA indicated that only 2 out of the 3 items had
significant t-values and low modification indices. The
reliability as indicated by coefficient alpha was found to be
0.70. Table 4-5 indicates the items used for measuring this
construct.
Convergent and discriminant validity of transaction specific
investment by a vendor (TSIV) and transaction specific
investment bv a retailer (TSIR)
Both transaction specific investment by vendor (TSIV)
and transaction specific investment by retailer (TSIR) which
are conceptually related but distinct were used to test the
convergent and discriminant validity. The convergent validity
was indicated by significant loadings and t-values of each
item on respective factors. This was confirmed by
modification indices of less than 5.0 for all the constrained
parameters. The chi-square statistics of the overall model
was not significant (p = 0.677) thus, indicating a good fit

131
of the model to the data. Further, other fit indices
confirmed the good fit of the data to the model (Root mean
square residual = 0.02, Goodness of fit = 0.991).
The discriminant validity of this model was assessed by
comparing this model to a model which constrained the
correlation between the constructs to be 1.0. The chi-square
difference between the two models with 1 degree of freedom
was 32.4, which was significant at 0.01 level indicating
strong discriminant validity.
Retailer's satisfaction with previous outcomes (SATOUT)
This scale describes the degree of satisfaction of
retail buyers with outcomes obtained in previous
negotiations.
Four items were used to describe the construct. Unlike
other constructs, this scale was measured by a seven point
semantic differential scale with anchors being pleased-
displeased, contented-disgusted, sad-happy, and satisfied-
dissatisfied. An EFA of the four items with items of
satisfaction with the relationship (SATREL)8 indicated a two-
dimensional structure with the second dimension being
satisfaction with outcomes. The CFA using LISREL 7 yielded
similar results with significant loadings on all except one
item. The t-values associated with all the items were
significant at 0.05 level. The reliability as assessed by
8 SATREL (satisfaction with all aspects of a relationship)
was used to used to test the discriminant validity of
satisfaction with outcomes (SATOUT) construct.

132
coefficient alpha was 0.92. The items used to describe this
construct are shown in Table 4-6.
Convergent and discriminant validity of retailer's
satisfaction with previous outcomes (SATOUT)
Two constructs, satisfaction with past negotiation
outcomes (SATOUT) and satisfaction with the relationship
(SATREL) which are conceptually related but distinct were
used to test the convergent and discriminant validity of
satisfaction with negotiation outcomes (SATOUT). The
convergent validity was indicated by significant loading on
each item representing satisfaction with outcome (SATOUT).
The t-value associated with each item was significant at 0.05
level. The overall fit of the model to data was good based on
the chi-square statistics which was not significant (p =
0.254). Further, other fit indices showed a good fit of the
data to the model (Root mean square residual = 0.02, Goodness
of fit = 0.979).
The discriminant validity of this model was assessed by
comparing this model to a model which constrained the
correlation between the constructs to be 1.0. The chi-square
difference between the two models with 1 degree of freedom
was 7.45, which was significant at 0.05 level indicating
strong discriminant validity.
Retailer's trust in vendor organization (ORGTRS)
This scale describes a retail buyer's trust of vendor's
organization. The items use to measure this construct reflect
the retail buyer's assessment of the vendor's organization in

133
terms of its reliability, honesty, and various procedural
aspects of their relationship.
Based on the conceptual definition of trust, ten items
were proposed. The set of 10 items items were subjected to
EFA along with items representing reputation9 and individual
trust. Nine out of ten items were found to load on a single
dimension. A CFA using LISREL 7 indicated that 8 out of 9
items loaded uniquely and significantly on organizational
trust. The reliability of this construct as assessed by
coefficient alpha was 0.93. Table 4-7 describes the items
used to measure this construct.
Retailer's trust in vendor's representative (INDTRS)
This scale is similar to the previous scale, but it
describes retail buyer's trust in vendor's representative.
Based on the definition of trust in the literature (Lindskold
1977), a multidimensional construct was proposed. A total of
19 items which tapped into different dimensions of trust such
as reliability, knowledge, honesty, and benevolence were
proposed.
Since, the proposed construct was multidimensional in
nature, adequate items were chosen from all four dimensions.
These set of items were subjected to a EFA to ascertain the
multidimensionality of the construct. The EFA indicated
unidimensionality with the first factor explaining 92% of the
9 Reputation of the vendor, another related construct was
used to test the discriminant validity of individual and
organizational trust.

134
total variance. This led to the rejection of the
multidimensionality of individual trust. The EFA also
indicated that five items did not load highly on the
unidimensional trust construct (QB24, QB28, QB30, QB3 6,
OB43). These items were eliminated from further analysis. All
the remaining 14 items were now subjected to CFA along with
items representing organizational trust and reputation. Only
9 out of 14 items loaded significantly and uniquely on
individual trust as indicated by t-values. The reliability as
indicated by coefficient alpha was 0.92. Table 4-8 describes
the set of items describing individual trust.
Convergent and discriminant validity of retailer's trust in
vendor representative (INDTRS) and retailer's trust in
vendor organization (ORGTRS)
Three constructs, reputation of a resource, retailer's
trust in vendor organization and trust in their
representative, which are all conceptually related but
distinct, were used to test the convergent and discriminant
validity of the set of constructs. The convergent validity
was indicated by significant loading of each item on the
relevant factor. The t-value associated with each item was
significant at 0.05 level. The overall fit of the model to
data is not good based on the significant chi-square
statistics (p = 0.000) and Goodness of Fit index (GFI =
0.754). However, other fit indices such as Root mean square

135
residual (=0.05) and modification index (< 5.0) showed a
reasonable fit of the data to the model.10
The discriminant validity of this model was assessed by
comparing this model to a model which constrained the
correlation between the constructs to be 1.0. The chi-square
difference between the two models with 3 degrees of freedom
was 286.54, which was significant at 0.01 level indicating
strong discriminant validity.
Retailer's expectation of future interactions (EFI)
Expectation of future interactions describes the
perception of the retailer that both parties are likely to
continue their relationship in future. This measure does not
capture the retailer's desire to continue the relationship
with the vendor but reflects the retailer's expectation about
future interactions. This is similar to measures of
expectation used in previous studies (Anderson and Weitz
1989; Heide and John 1990).
Initially, four items were proposed to describe the
construct. An EFA was conducted on the four items along with
items representing retailer's long-term orientation (RLTO)
and vendor's long-term orientation (VLTO). The results of EFA
indicated a three factor model. Three items out of four
measuring expectation of future interactions loaded
significantly on the dimension representing retailer's
10 A respecified model which indicated that reputation and
organizational trust were the same construct was rejected and
this model did not explain the data better than the model
used here.

136
expectation of future interactions (EFI). The three items
from EFA were subjected to a CFA using LISREL 7. All the
three items showed significantly high loadings on the
construct as indicated by t-values. The reliability as
indicated by coefficient alpha was found to be 0.75. Table 4-
9 describes the measures used for capturing the construct.
Retailer's long-term orientation (RLTO)
This scale describes the orientation of a retail buyer
towards developing long-term relationship with vendors. This
scale captures the desire of a retail buyer to have a long¬
term relationship, and is different from the previous scale
which captured the expectation of future interactions.
Based on the definition of the construct, 21 items were
proposed. These items were subjected to a EFA along with
items capturing expectation of future interactions (EFI) and
vendor's long-term orientation (VLTO). Fourteen items out of
21 items loaded on the second factor which represented
retailer's long-term orientation. The CFA on the remaining
items using LISREL 7, indicated that only 8 out of the 14
items loaded significantly on the construct as indicated by
significant t-values. Reliability as indicated by coefficient
alpha was 0.94 for the remaining items. Table 4-10 describes
the items used for capturing the long-term orientation of a
retail buyer.

137
Vendor's long-term orientation (VLTO)
This scale is similar to the preceding one, but it
describes the orientation of a vendor towards developing a
long-term relationship with a retailer. Once again, this
construct represents a long-term orientation of a vendor and
not just expectations of continuity of a relationship.
Based on the previous scale, a set of 13 items were
developed. The 13 items were subjected to a EFA along with
items representing retailer's long-term orientation (RLTO)
and retailer's expectation of future interactions (EFI). Two
items from the set of 13 had low factor loadings on the
relevant factor and were removed from further analysis. The
11 items were subjected to CFA using LISREL 7 which resulted
in 5 items having significant factor loadings. The
reliability of the scale as indicated by coefficient alpha
was 0.91. Table 4-11 describes the items used for this
construct.
Convergent and discriminant validity of retailer's long-term
orientation (RLTO), vendor's long-term orientation (VLTO)
and retailer's expectation of future interactions (EFI)
Three constructs, retailer's expectation of future
interactions (EFI), retailer's long-term orientation (RLTO)
and vendor's long-term orientation (VLTO) which are
conceptually related but distinct, were used to test the
convergent and discriminant validity of these constructs. The
convergent validity was indicated by significant loading of
each item on the relevant factor. The t-value associated with

138
each item was significant at 0.05 level. The overall fit of
the model to data was good based on Goodness of Fit index
(GFI = 0.823), Root mean square residual (= 0.04) and
Modification index (< 5.0)
The discriminant validity of this model was assessed by
comparing this model to a model which constrained the
correlation between the constructs to be 1.0. The chi-square
difference between the two models with 3 degrees of freedom
was 105.59, which was significant at 0.01 level indicating
strong discriminant validity.
Environmental uncertainty (ENVUNC)
This scale describes the inability of a retail buyer to
accurately asses the environment and reflects the uncertainty
associated with predicting the demand for their products, the
changes in consumer preferences, and the changes in
competition. This is based on a similar scale developed by
John and Weitz (1988) to measure environmental uncertainty.
A set of 8 semantic differential items were proposed.
The set of 8 items were subjected to a EFA analysis which
indicated two main factors. To get a better factor pattern,
the factors were rotated using Varimax procedure. This
resulted in two distinct dimensions, with three items loading
on the first dimension and four items loading on the second
dimension. Conceptually, the first dimension reflected the
diversity aspect of environmental uncertainty. It was a
function of the extent to which new products, and new

139
competitors were entering the market. This dimension was
referred to as "environmental diversity". The second
dimension reflected the uncertainty due to fluctuations in
demand. This construct captured the uncertainties associated
with predicting demand for products, monitoring trends, and
making accurate sales forecasts. Therefore, this dimension
was referred to as "environmental volatility".
Environmental diversity (EDIV)
This scale describes the uncertainty in the environment
due to new competitors, and new products.
Table 4-12 indicates the items reflecting the
environmental diversity. The CFA of the three items
representing diversity and the four items capturing
environmental volatility using LISREL 7 indicated significant
loadings for all three items. The reliability as assessed by
coefficient alpha was 0.64.
Environmental volatility (EVOL)
This scale describes the environmental uncertainty due
to an inability to make accurate forecasts, predict demand
for products, and monitor trends.
A CFA on four items using LISREL 7 indicated significant
loadings on environmental volatility for all the four items.
The reliability as indicated by coefficient alpha was 0.75.
Table 4-12 indicates the items reflecting environmental
volatility.

140
Convergent and discriminant validity of environmental
diversity (EDIV) and environmental volatility (EVOL)
The convergent validity of environmental diversity and
volatility was indicated by significant loadings of items on
respective factors. The t-value associated with each item was
significant at 0.05 level. The overall fit of the model to
data was good based on chi-square (p = 0.321), Goodness of
Fit index (GFI = 0.961), and Root mean square residual (RMSR
= 0.04) .
The discriminant validity of this model was assessed by
comparing this model to a model which constrained the
correlation between the constructs to 1.0. The chi-square
difference between the two models with 1 degree of freedom
was 6.54, which was significant at 0.05 level indicating good
discriminant validity.
Summary
All the measures used to represent the constructs showed
high convergent and discriminant validity. The convergent
validity as indicated by significant loadings, and
reliability coefficients greater than 0.60, indicating a
satisfactory benchmark for exploratory studies (Nunnally
1971). The discriminant validity was indicated by chi-square
difference tests and in all cases resulted in significance,
indicating that the constructs were conceptually different.

141
Negotiation Constructs
Overview
Negotiation between retailers and vendors occurs on a
number of issues. These issues are quality of the product,
price and markup, delivery, gross margin, exclusive selling
rights, freight expenses, training, in store promotion,
cooperative advertising, markdown money, full guarantee,
quantity discounts, returns, and premarking and packing.
Although this list is exhaustive, most negotiations occur on
a subset of these issues. To accommodate a negotiation on a
subset of issues, the retailers were asked to respond only on
issues which were discussed in such negotiations.
Retailer's initial offer with respect to retailer's
aspiration level (RIORAL)
Retailer's initial offer refers to the first offer made
by the retailer in a negotiation. Since aspiration level or
the goal of a negotiator determines the initial offer, this
construct was measured relative to the retailer's aspiration
level. Thus, this construct reflects the degree to which the
retailer's initial offer is close to or farther off from the
retailer's own aspiration level before the beginning of
actual negotiations.
Retailer's initial offer compared to own aspiration
level (RIORAL) was measured on a 7 point semantic
differential with anchors being "much worse than our final
expectations" on one end and "much better than our final

142
expectations" on the other. The middle point of this scale
(4) represented an initial offer which was the same as their
aspiration level. The retailer's initial offer was measured
on all issues discussed during the negotiations.
Although this scale measured retailer's initial offer on
multiple issues, a single score for this construct was
obtained by averaging across the issues. Since a single item
measure was used for this construct, assessment of
unidimensionality and reliability was not possible.
Vendor's initial offer with respect to vendor's aspiration
level (VIOVAL)
Vendor's initial offer refers to the first offer made by
a vendor in a negotiation (as perceived by retailer). Since
aspiration level or goal of vendors determines their initial
offer, this construct was measured relative to the vendor's
aspiration level. Thus, this construct reflects the degree to
which the vendor's initial offer is close to or farther off
from the vendor's own aspiration level before the beginning
of actual negotiations.
Vendor's initial offer compared to own aspiration level
(VIOVAL) was measured in the same fashion as the previous
construct.
Retailer's message sending behavior
Retailer's message sending behaviors are the
communication tactics used by a retailer in a negotiation.
Such tactics allow retailers to get insight into the vendor's
motivational structure, goals, values, and constraints.

143
Past research in bargaining (Angelmar and Stern 1978)
has found two different sets of negotiation behaviors:
integrative and distributive. To capture these two
constructs, a set of 18 items were developed based on
previous research and interviews with various retail buyers.
All the items were 7 point Likert scale items. To assess the
dimensionality and test the validity of previous two-factor
models, all the 18 items were factor analyzed. The resulting
principal component analysis indicated two distinct factors.
As a result, the factors were rotated using the Varimax
rotation procedure. The resulting factor structure confirmed
previous research which had found two distinct sets of
message sending behaviors. To further verify this structure,
a confirmatory factor analysis was done which revealed a
similar structure. The next step involved developing a scale
for the retailer's integrative and distributive message
sending behaviors.
1) Retailer's integrative message sending behavior
(RINTMSG). Retailer's integrative message sending behavior
captures the extent to which retail buyers use integrative
messages in their negotiations.
A total of 7 items were used to capture integrative
behaviors by retailers. The exploratory factor analysis
indicated that 6 out of the 7 items loaded on the second
factor i.e. retailer's integrative behavior. The CFA by
Lisrel 7 showed that only 4 out of the 6 items had
significant factor loadings. Table 4-13 indicates the items

144
and their factor loadings. The reliability as indicated by
coefficient alpha was 0.76.
2) Retailer's distributive message sending behavior
(RDISMSG). Retailer's distributive message sending behavior
is the extent to which the retail buyers use distributive
messages in their negotiations.
A total of 7 items were used to capture distributive
behavior by retailers. The exploratory factor analysis
indicated that 6 out of the 7 items loaded on the first
factor i.e. retailer's distributive behavior. The CFA by
Lisrel 7 showed that 4 out of the 6 items had factor loadings
which were significant. Table 4-13 indicates the items and
their factor loadings. The overall reliability as indicated
by coefficient alpha was 0.69.
Convergent and discriminant validity retailer's integrative
(RINTMSG) and distributive (RDISMSG) message sending
behavior
The convergent validity of the two measures was
indicated by the significant loadings of the items as
indicated by t-values. Further, the overall model fit the
data very well as indicated by fit measures. The chi-square
was not significant (p = 0.866), the goodness of fit was
0.97, and the root mean square residual was 0.04.
To test the discriminant validity of retailer's
integrative and distributive messages, a model with
correlated constructs was compared to a nested model with
constructs having a correlation of 1.0. The chi-square

145
difference between the two models (67.39) with 1 degree of
freedom was significant at 0.01 level suggesting that the two
constructs, retailer's integrative and distributive message
sending behaviors were conceptually different.
Vendor's message sending behavior
Vendor's message sending behaviors are communication
tactics used by vendors in negotiations as perceived by
retailers. Such message sending behaviors allow vendors to
get insight into a retailer's motivational structure, goals,
values.
1) Vendor's integrative message sending behavior
(VINTMSG). Vendor's integrative message sending behavior is a
retailer's perception of the extent to which vendors use
integrative messages in their negotiations.
A total of 7 items were used to capture integrative
behaviors by vendors. The items parallel the items used for
retailer's integrative message sending behavior. The
exploratory factor analysis indicated that 6 out of the 7
items loaded on the first factor i.e. vendor's integrative
behavior. The CFA by Lisrel 7 showed that only 4 out of the 6
items had significant factor loadings. Table 4-14 indicates
the items and their factor loadings. The overall reliability
as indicated by coefficient alpha was 0.72.
2) Vendor's distributive message sending behavior
(VDISMSG). Vendor's distributive message sending behavior is
a retailer's perception of the extent to which vendors use

146
distributive messages in their negotiations.
A total of 7 items were to capture distributive
behaviors by vendors. The exploratory factor analysis
indicated that 6 out of the 7 items loaded on the second
factor i.e. vendor's distributive behavior. The CFA by Lisrel
7 showed that 4 out of the 6 items had factor loadings which
were significant. Table 4-14 indicates the items and their
factor loadings. The overall reliability as indicated by
coefficient alpha was 0.70.
Convergent and Discriminant validity of vendor's integrative
(VINTMSG) and distributive (VDISMSG) message sending
behavior
The convergent validity of the two measures was
indicated by the significant loadings of the items on their
respective factors as indicated by t-values. Further, the
overall model fit the data very well as indicated by goodness
of fit measures. The chi-square was not significant (p =
0.066), the goodness of fit was 0.93, and the root mean
square residual was 0.05.
To test the discriminant validity of vendor's
integrative and distributive messages, a model with
correlated constructs was compared to a nested model with
constructs having a correlation of 1.0. The chi-square
difference between the two models (64.59) with 1 degree of
freedom was significant at 0.01 level suggesting that the two
constructs, vendor's integrative and distributive message
sending behaviors were separate constructs.

147
Retailer's conflict resolution strategies
Retailer's conflict resolution strategy is the set of
tactics adopted by retail buyers during negotiations to
resolve conflicts. Blake and Mouton (1964,1970), and Rahim
(1983) have found that in organizational settings, managers
adopted five distinct conflict resolution styles. Following
their suggestion, items representing the five conflict
resolution styles were developed. The five conflict
resolution styles were avoiding, accommodating, compromising,
competing, and collaborating.
The items representing the five conflict resolution
styles were subjected to an exploratory factor analysis. The
results indicated that instead of a five dimensional solution
found in previous studies only three dimensions were
significant. These dimensions were labelled aggressive or
competing, problem solving or collaborating, and compromising
strategies based on the domain of items.11
11.. Retailer's problem solving conflict resolution
strategy (PROBSOL). Retailer's problem solving conflict
resolution strategy focuses on integrating the objectives of
both parties in a negotiation to resolve conflicts.
A total of 8 items were proposed to capture the problem
solving strategy of the retailer.These were based on
11 The two dimensions which were not significant, reflected
strategies which may not be relevant in a retail context.
Both dimensions suggested conflict resolution strategies
where the retail buyers did not care about their own
outcomes.

148
interviews with retail buyers and from existing measures for
this construct (Rahim 1983, Thomas and Kilman 1974). The
items were subjected to an exploratory factor analysis with
items related to other conflict resolution strategies. Only 7
of the 8 items showed significant loadings on the factor
representing problem solving strategy. To test the convergent
validity, the items were subjected to a CFA by LISREL 7. This
procedure resulted in significant loadings for 6 out of the 7
items. All the items had significant t-values. Items which
loaded significantly are shown in Table 4-15. The reliability
of the scale as indicated by coefficient alpha was 0.88.
2) Retailer's aggressive conflict resolution strategy
(AGGRES). Retailer's aggressive conflict resolution strategy
focuses on using aggressive tactics such as threats, phony
arguments to resolve conflicts.
A total of 6 items were proposed to capture the
aggressive strategy of the retailer.These were based on
interviews with retail buyers and from existing measures for
this construct (Rahim 1983, Thomas and Kilman 1974). These
items were subjected to an exploratory factor analysis along
with items related to other conflict resolution strategies.
All the 6 items showed significant loadings on the factor
representing aggressive strategy. To test the convergent
validity, the items were further subjected to a CFA by LISREL
7. This procedure resulted in significant loadings for 4 out
of the 6 items. All the items had significant t-values. Items
which loaded significantly are shown in Table 4-15. The

149
reliability of the scale as indicated by coefficient alpha
was 0.90.
3) Retailer'5 compromise conflict resolution strategy
(COMPRO). Retailer's compromise conflict resolution strategy
focuses on adopting a compromise solution to resolve
conflicts.
A total of 10 items were proposed to capture the
compromising strategy of the retailer. These were based on
interviews with retail buyers and from existing measures for
this construct (Rahim 1983, Thomas and Kilman 1974) . These
items were subjected to an exploratory factor analysis along
with items related to other conflict resolution strategies.
Only 8 items showed significant loadings on the factor
representing compromise strategy. To test the convergent
validity, these items were further subjected to a CFA by
LISREL 7. This procedure resulted in significant loadings for
7 out of 8 items. All the items had significant t-values.
Items which loaded significantly are shown in Table 4-15. The
reliability of the scale as indicated by coefficient alpha
was 0.82.
Convergent and discriminant validity of retailer's problem
solving (PROBSOL), aggressive (AGGRES) and compromise
(COMPRO) conflict resolution Strategies
To test the convergent validity, the items related to
all the three conflict resolution strategies were subjected
to a CFA. The items representing the three constructs loaded
significantly on respective dimensions as indicated by their

150
t-values. Although the overall model resulted in significant
chi-square, the RMSR was 0.06 which was within tolerable
limits. Further, the ratio of chi-square to degrees of
freedom was less than 3.0 suggesting a reasonable model.
The discriminant validity was tested by a nested model
approach. The chi-square from the above model was tested
against a model in which the correlation between the
constructs was fixed to 1.0. The chi-square difference
between the two models was 304.11 with 3 degrees of freedom.
This rejected the null hypothesis that the constructs were
the same and indicated conceptually different conflict
resolution strategies.
Retailer's importance of negotiation issues (RIMP)
This construct captures the importance attached by the
retail buyer to various negotiation issues.
Retailer's importance of negotiation issues (RIMP) was
measured on a seven point semantic differential scale with
anchors being "unimportant" and "very important". The
retailer's importance of issues was measured on the
exhaustive set of 14 issues rather than the limited set of
issues discussed in the negotiation.
This construct was used as a weight attached by retail
buyers to the different issues while making concessions.
Vendor's importance of negotiation issues (VIMP)
This construct captures the retailer's perception of
importance attached to various negotiation issues by vendors.

151
As in other constructs discussed here, this reflects the
retailer's perception of vendor's importance of various
issues and not the vendor's own importance rating.
Vendor's importance of negotiation issues (VIMP) was
measured on a seven point semantic differential scale with
anchors being "unimportant" and "very important". The
vendor's importance of issues was measured on an exhaustive
set of 14 issues rather than the limited issues discussed in
the negotiation.
This construct was used as a weight attached by vendors
to various issues while making concessions.
Level of disagreement on negotiation issues (DISAGR)
This construct captures the extent of disagreement
between the retailer and vendor on issues being negotiated.
Disagreement on negotiation issues was measured by a
seven point semantic differential scale with anchors being
"No disagreement" and "Intense disagreement". The respondents
were asked to indicate their disagreement only on issues
which were discussed in the negotiation. An overall level of
disagreement was obtained by averaging across the issues.
Thus, no indicants of reliability of the scale could be
obtained.
Retailer's concessions on issues (RCONS)
This construct captures the concessions made by the
retailer on various issues discussed during the negotiations.
The retailer's concession on negotiation issues was

152
measured by a seven point semantic differential scale with
anchors being "Made very few concessions" and "Made a lot of
concessions". The respondents were asked to indicate their
concessions only on issues that were discussed in the
negotiation.
Vendor's concessions on issues (VCONS)
This construct captures the concessions made by the
vendor on various issues discussed during the negotiations as
perceived by a retailer.
Vendor's concession on negotiation issues was measured
by a seven point semantic differential scale with anchors
being "Made very few concessions" and "Made a lot of
concessions". The respondents were asked to indicate their
concessions only on issues which were discussed in the
negotiation.
Retailer's concessions on issues weighted by retailer's
importance of issues (RCNXIM)
This construct captures the concessions made by
retailers weighted by their importance of various issues. In
other words, a concession on an issue which is very important
to the retailer would indicate greater concessions on the
part of a retailer than concessions on a less important
issue.
This measure was obtained by multiplying the concession
on an issue by its importance and then averaging it across
all issues negotiated.

153
Vendor's concessions on issues weighted by vendor's
importance of issues (VCNXIM)
This construct captures the concessions made by vendors
weighted by their importance of various issues as perceived
by the retailer. In other words,, a concession on an issue
which is very important to the vendor would indicate greater
concessions on the part of a vendor than concessions on a
less important issue.
This measure was obtained by multiplying the concession
on an issue by its importance and then averaging it across
all issues negotiated.
Retailer's satisfaction with negotiation outcomes (RSAT)
Retailer's satisfaction with negotiation outcomes
indicates a retailer's overall level of satisfaction with
outcomes.
This construct was measured using a two item semantic
differential scale with anchors being "very dissatisfied -
very satisfied", and "very little-a lot". Both the items
loaded significantly on this factor. The items are shown in
Table 4-17.
Summary
All the measures which were used to capture the
negotiation between the retailer and vendor showed adequate
convergent and discriminant validity. The convergent validity
was indicated by goodness of fit indices, chi-square,
reliability coefficients and t-values of individual

154
parameters. All the measures indicated convergent validity.
The discriminant validity was indicated by chi-square
differences among nested models and in all cases, this
resulted in significant difference in chi-squares.

155
Table 4-1
Frequency of Respondents Based on the Nature of Relationship
and Product Importance
a ) PART A Product Importance
Moderately ' Very
Important Important
Short - term
26
22
48
Nature of
Relationship
Long - term
46
30
76
72
52
124
a ) PART B Product Importance
Moderately Very
Important Important
Short - term
Nature of
Relationship
22
17
35
26
39
61
57
43
100
Long-term

156
Table 4-2
Dependence of a Retailer on Vendor
Item Item*
No.
QA2 This resource's product lines are essential to
round out our product offering.
QA9 We are dependent on this resource.
QA10 This resource is important to our business.
QA18 This resource is crucial to our future performance.
QA21 If our relationship was discontinued with this
resource, we would have difficulty in making up
sales volume in our trading area.
QA29 This resource's products generate a high sales
volume in my department.
QA34 We do not have a good alternative to this resource.
QA36 If our relationship was discontinued, we would have
difficulty replacing this resource.
* All items are Likert scales items anchored by
strongly disagree (1) and strongly agree (7)
** These loadings are the lambda estimates from the
LISREL model
Loading **
(Factor 1)
0.89
0.81
0.86
0.86
0.82
0.84
0.68
0.82
Coefficient alpha is 0.944

157
Table 4-3
Dependence of a Vendor on Retailer
Item Item*
No
QA14 We are a major outlet for this resource in our
trading area.
QA26 If our relationship with this resource was
discontinued, the resource would have difficulty-
selling their products in our trading area.
* All items are Likert scales items anchored by
strongly disagree (1) and strongly agree (7)
** These loadings are the lambda estimates from the
LISREL model
Coefficient alpha is 0.55
Loading**
(Factor 2)
0.80
0.47

158
Loading* *
(Factor 3)
0.68
0.79
* All items are Likert scales items anchored by
strongly disagree (1) and strongly agree (7)
** These loadings are the lambda estimates from the
LISREL model
*** Reversed item
Coefficient alpha is 0.698
Table 4-4
Power Imbalance
Item Item*
No.
QA3 We possess more power than this resource in our
relationship.
QA11 This resource is more powerful than us. ***
Combined model with Dependence of Retailer on Vendor.
Dependence of Vendor on Retailer, and Power Imbalance
Chi-square with 51 d.f = 111.81 (p = 0.000)
Goodness of fit index = 0.83
Root mean square residual = 0.05

159
Table 4-5
Transaction Specific Investments by the Retailer
Item Item*
No.
QA7 We have made significant investments in displays,
trained salespeople etc. dedicated to our
relationship with this vendor.
QA33 We have invested a great deal in building up this
resource's business.
QA37 We have invested substantially in personnel
dedicated to this resource.
* All items are Likert scales items anchored by
strongly disagree (1) and strongly agree (7)
** These loadings are the lambda estimates from the
LISREL model
Loading**
(Factor 1)
0.97
0.64
0.64
Coefficient alpha is 0.79

160
Table 4-6
Transaction Specific Investments by the Vendor
Item Item* Loading * *
No. (Factor 2)
QA15 This vendor has tailored its merchandise and 0.97
procedures to meet the specific needs of our
company.
QA23 This resource has gone out of their way to link, us 0.53
with their business.
* All items are Likert scales items anchored by
strongly disagree (1) and strongly agree (7)
** These loadings are the lambda estimates from the
LISREL model
Coefficient alpha is 0.70
Overall fitness of the model with Transaction specific
investments by the retailer and vendor
Chi-square with 4 d.f is 2.32 (p = 0.677)
Goodness of fit index is 0.991
Root mean square residual is 0.02

161
Table 4-7
Satisfaction with Past Negotiation Outcomes
Item Item* Loading * *
No. (Factor 1)
Describe your feelings with respect to the
negotiation outcomes with this resource in the
past one year:
QB48B Sad-happy *** 0.86
QB48C Contented-disgusted 0.87
QB48D Dissatisfied - satisfied *** 0.96
* All items are Semantic Differential scale items
anchored by 1 and 7.
** These loadings are the lambda estimates from the
LISREL model
*** This indicates a reversed item.
Coefficient alpha is 0.94
Overall fitness of the model including Satisfaction
with the Relationship and Satisfaction with the
Negotiation Outcomes
Chi-square with 4 d.f is 5.34 (p = 0.254)
Goodness of fit index is 0.979
Root mean square residual is 0.023

162
Table 4-8
Retailer's Trust in Vendor Organization
Item Item* Loading**
No. (Factor 1)
QB3 Promises made by this resource are reliable. 0.85
QB6 This resource is not open dealing with us.*** 0.74
QB8 This resource has gone out of its way to help us 0.79
out.
QB11 This resource has been consistent in terms of 0.82
their policies.
QB14 This resource considers our interests when 0.83
problems arise.
QB15 This resource cares for us. 0.88
QB18 This resource has made sacrifices for us in the 0.62
past.
* All items are Likert scales items anchored by
strongly disagree (1) and strongly agree (7)
** These loadings are the lambda estimates from the
LISREL model
*** This indicates a reversed item.
Coefficient alpha is 0.93

163
Table 4-9
Retailer's Trust in Vendor's Representative
Item Item* Loading**
No. (Factor 2)
QB26 This resource's representative has gone out of 0.87
his/her way to help us out.
QB31 The resource's representative is always on top 0.70
of things related to his/her job.
QB33 The resource's representative offers innovative 0.78
solutions to problems.
QB34 The resource's representative has problems 0.58
answering our questions. ***
QB35 I have a close relationship with the resource's 0.78
representative.
QB37 I like the resource's representative. 0.73
QB41 This resource's represntative cares for us. 0.84
QB42 This resource's representative has made sacrifices 0.76
for us in the past.
QB44 I feel the resource's represntative has been on 0.82
our side.
* All items are Likert scales items anchored by
strongly disagree (1) and strongly agree (7)
** These loadings are the lambda estimates from the
LISREL model
*** This indicates a reversed item.
Coefficient alpha is 0.96
Overall fitness of the model which includes
Reputa.tion „of the Resource, Retailer's, Trust jn the Vendor
Organization and Trust in the Representative
Chi-square with 149 d.f is 281.51 (p = 0.000)
Goodness of fit index is 0.754
Root mean square residual is 0.057

164
Table 4-10
Retailer's Expectation of Future Interactions
Item Item* Loading**
No. (Factor 1)
QA12 The likelihood of this relationship breaking 0.53
down is high. ***
QA20 We expect to interact with this resource in future. 0.73
QA25 We do not expect this relationship to continue for 0.88
long. ***
* All items are Likert scales items anchored by
strongly disagree (1) and strongly agree (7)
** These loadings are the lambda estimates from the
LISREL model
*** Reversed item
Coefficient alpha is 0.75

165
Table 4-11
Retailer's Long-Term Orientation
Item
No.
Item*
Loadina**
(Factor 2)
QC1
We would like to develop a long-term relationship
with this resource.
0.85
QC2
We are willing to make sacrifices to help this
resource from time to time.
0.66
QC3
We believe that over the long-run this
relationship will be profitable.
0.88
QC4
Any concessions we make to help out this resource
will even out in the long-run.
0.69
QC5
We focus on long-term goals in this relationship.
0.85
QC7
We expect this resource to be working with us for
a long time.
0.92
QC8
Mainitaining a long-term relationship with this
resource is important to us.
0.89
* All items are Likert scales items anchored by
strongly disagree (1) and strongly agree (7)
** These loadings are the lambda estimates from the
LISREL model
*** This indicates a reversed item.
Coefficient alpha is 0.94

166
Table 4-12
Vendor's Long-Term Orientation
Item Item* Loading**
No. (Factor 3)
QC26 This resource is interested in developing long- 0.75
term relationship with us.
QC28 This resource believes that over the long-run 0.87
their relationship with us will be profitable.
QC31 This resource has long-term goals when dealing 0.78
with us.
QC32 The resource expects to be supplying to us for a 0.88
long time.
QC33 Maintaining a long-term relationship with us is 0.84
very important to this resource.
* All items are Likert scales items anchored by
strongly disagree (1) and strongly agree (7)
** These loadings are the lambda estimates from the
LISREL model
*** This indicates a reversed item.
Coefficient alpha is 0.89
Overall fitness of the model which includes
Retailer's Expectation of Future Interactions, Long-
Term Orientation, and Vendor's Long-Term Orientation
Chi-square with 101 d.f is 180.70 (p = 0.000)
Goodness of fit index is 0.823
Root mean square residual is 0.045

167
Table 4-13
Environmental Uncertainly
Item
Item*
Loadina**
No.
Factor 1
Factor
(Env.Div.
(Env.Vol
How would you describe the market for the
product you buy from this vendor compared
to other products in general?
QD2
Stable market shares - Volatile market
shares
0.75
QD4
Few new products - Many new products
0.49
QD8
Few new competitors - Many new competitors
0.54
QD3
Easy to monitor trends - Difficult to
monitor trends
0.65
QD5
Stable industry volume - Volatile industry
volume
0.73
QD6
Sales forecasts are accurate - Sales
forecasts are inaccurate
0.65
QD7
Unpredictable demand - Predictable demand***
0.57
* All items are semantic differential scale
items with the end points being 1 and 7.
** These loadings are the lambda estimates from the
LISREL model
*** This indicates a reversed item.
Coefficient alpha is 0.64 0.75
Overall fitness of the models for Environmental
Diversity and Volatility
Chi-square with 13 d.f is 14.79 (p = 0.321)
Goodness of fit index is 0.961
Root mean square residual is 0.046

168
Table 4-14
Retailer's Message Sending Behavior
Item Item*
No-
QBR3 We communicated our priorities clearly to
the resource.
QBR9 We were committed to our initial position
during the negotiation.
QBR12 We kept the resource well informed of our
needs throughout the negotiation.
QBR14 We indicated a need for both parties to be 0.57
fully satisfied.
QBR5 We threatened to break off negotiations 0.69
with the resource.
QBR6 We indicated that we wanted to deal with 0.37
other resources.
QBR7 We made implicit threats to the resource. 0.77
QBR8 We expressed displeasure with the 0.59
resource's behavior.
Loading**
Factor 1 Factor 2
(Int.) (Dist.)
0.62
0.57
0.94
* All items are Likert scale
items with the end points being 1 and 7.
** These loadings are the lambda estimates from the
LISREL model
Coefficient alpha is
0.76 0.69
Overall,fitness of.the models for Retailer's Integrative
and Distributive Messages
Chi-square with 19 d.f is 12.44 (p = 0.866)
Goodness of fit index is 0.97
Root mean square residual is 0.043

169
Table 4-15
Vendor's Message Sending Behavior
Item
Item*
Loading**
No.
Factor
(Int.)
1 Factor
(Dist.
QBV3
The resource communicated their priorities
clearly to us.
0.63
QBV4
The resource asked many questions about
our priorities.
0.43
QBVll The resource emphasized the rewards
available to both parties from a successful
deal.
0.62
QBV12 The resource kept us well informed of thei
needs throughout the negotiation.
0.85
QBV2
We felt that the resource was hiding
something from us.
0.37
QBV5
The resource threatened to break off
negotiation with us.
0.53
QBV7
The resource made implicit threats to us.
0.85
QBV8
The resource expressed displeasure with our
behavior.
0.71
* All items are Likert scale
items with the end points being 1 and 7.
** These loadings are the lambda estimates from the
LISREL model
Coefficient alpha is
0.72 0.70
Overall fitness of the models for Vendor's Integrative
and Distributive Messages
Chi-square with 19 d.f is 31.12 (p = 0.05)
Goodness of fit index is 0.93
Root mean square residual is 0.07

170
Table 4-16
Retailer's Use of Conflict Resolution Strategies
Item
Item*
Loadina**
No.
Factor 1 Factor
(Compro Probsol
C3
We try to find a compromise solution.
0.88
C6
We try to soothe the resource's feelings and
preserve our relationship.
0.73
C9
We try to do what is necessary to avoid
tensions.
0.52
C17
We try to find a fair combination of gains
and losses for both of us.
0.68
C19
We try to find a position that is intermed¬
iate between their position and our position.
0.43
C20
We try not to hurt the resource's feelings
0.48
C26
We propose a middle ground.
0.55
Cl
We lean toward a direct discussion of problem
with this resource.
0.73
CIO
We attempt to get all our concerns and issues
in the open.
0.87
Cll
We share the problem with the resource so that 0.63
we can work it out.
C12
We tell the resource our ideas and ask them
for their ideas.
0.74
C13
We try to show this resource the logic and
benefits of our position.
0.73
C16
We attempt to work through our differences as
quickly as possible.
0.72
* All items are Likert scale
items with the end points being 1 and 7.
** These loadings are the lambda estimates from the
LISREL model
Coefficient alpha is
0.82
0.88

171
Table 4-16 (Continued)
Retailer's Use of Conflict Resolution Strategies
Item
Item*
Loadina*
No.
Factor 3
(Aggres.)
C22
We try to win our position.
0.91
C23
We make effort to get our way.
0.92
C24
We press to get our points made.
0.81
C25
We assert our wishes.
0.66
Coefficient alpha ia
0.90
Overall fitness of the model which
includes
Retailer's use of Compromise. Problem Solving,
and Aaaressive Strateaies
Chi-square with 116 d.f. is 275.3
Goodness of fit index is 0.762
Root mean square residual is 0.079
(p = 0.00)

172
Table 4-17
Retailer's Satisfaction with the Negotiation
Item Item*
No.
How satisfied are you with this negotiation?
QE4A Very satisfied - Very dissatisfied
QE4B Very little - A lot
* All items are Semantic Differential scale items
anchored by 1 and 7.
** These loadings are the lambda estimates from the
LISREL model
*** This indicates a reversed item.
Coefficient alpha is 0.91
Loading**
(Factor 1)
0.87
0.83

CHAPTER 5
RESULTS
Overview
This chapter focuses on the results obtained in support
of hypotheses proposed in chapter 3. Though the hypotheses
developed in chapter 3 appear suited for testing through
LISREL, such a procedure did not seem to be appropriate as
the sample size for this study was less than 100. When the
sample size decreases to a small number (less than 100), the
statistical significance of individual parameters tends to
decrease (Long 1983). Further, for chi-square to be used as a
valid test statistic, the sample size should be large. As a
result of this, the LISREL model was not used to estimate the
models and test the proposed hypotheses.
The models therefore consist of a set of recursive
equations which are estimated using ordinary least squares
(OLS) procedures. OLS estimates obtained in systems of
equations which are recursive are unbiased (Pindyck and
Rubinfield 1984). Thus, all the analyses reported here are
based on OLS procedures.
Retailer's Expectation of Future Interactions
Summary of the results
According to the model shown in Figure 5-1, a retailer's
expectation of future interactions is affected by the power

174
imbalance, environmental diversity, environmental volatility,
transaction specific investments by retailer and vendor and
degree of competition in the vendor market. The correlations
between the variables are shown in Table 5-1. The equations
used to estimate the model and the estimated standardized
coefficients are given in Table 5-2.
The results of this section indicate that power
imbalance has a significant negative effect on retailer's
expectation of future interaction (bn = -0.324, p < 0.01).
This is consistent with prior research which indicates that
power imbalance has a significant negative effect on channel
members' expectation regarding the continuity of their
relationships (Anderson and Weitz 1989).
Both dimensions of environmental uncertainty, i.e.
environmental volatility and environmental diversity, were
not significantly related to retailer's expectation of future
interactions (bl3 = -0.111, p > 0.1 and bl2 = 0.086, p >
0.1). However, the sign of the regression coefficients were
in the same direction as predicted. Thus, both Hi and H2 were
not supported. The evidence in marketing literature regarding
the effect of environmental diversity and volatility on the
expectation of future interactions has been limited. Klein,
Frazier, and Roth (1990) used the same dimensions of
environmental uncertainty, i.e. diversity and volatility, and
found that environmental volatility had a significant
positive effect on the use of heirarchical organizational
structure (similar to vertically integrated units) compared

to market structures in an export market. It should be noted
that a positive relationship was proposed between
environmental volatility and the degree of channel
integration in the Klein et al. study which is in direct
contrast to the hypothesis posited in this dissertation. The
hypothesis in this dissertation _s consistent with the notion
of environmental volatility and its consequence on decision
making, as proposed by Leblebici and Salancik (1981) (see
next section for further discussion). Environmental diversity
was not significantly related to the degree of channel
integration in the Klein et al. study. The result obtained in
this dissertation regarding the effect of environmental
diversity on a retailer's expectation of future interactions
was also nonsignificant.
The relationship between transaction specific
investments by a retailer and vendor and the retailer's
expectation of future interactions as proposed in H3 was not
supported. Specifically, the interaction between transaction
specific investments by retailer and vendor on retailer's
expectation of future interactions was not significant. As a
result of the nonsignificance of the interaction term, a main
effect model which included transaction specific investments
by the retailer and vendor was tested. The main effect model
indicated that the transaction specific investments by a
vendor had a significant effect on a retailer's expectation
of future interactions (bi5 = 0.371, p < 0.01) while
transaction specific investments by a retailer had no effect

on the retailer's expectation of future interactions (bi4 =
0.027, NS). The results obtained from the main effect model
are consistent with the results obtained by Heide and John
(1990) indicating that supplier's (or vendor's) investments
in specific assets increase the expectations of continuity
while OEM's (retailer's) investment in specific assets do not
show a significant effect on expectations of continuity.
Hypothesis 4 which predicted an effect of the degree of
competition in the vendor market on retailer's expectation of
future interactions was not supported (bi6 = 0.10, NS).
Although no study has looked directly at the impact of the
competition in the vendor market on expectations of future
interactions, several studies have found an effect of the
degree of competition on power imbalance (See Gaski 1984).
Power imbalance, in turn, has been found to affect the
expectation of future interactions (Anderson and Weitz 1989).
Contrary to some of the findings in the literature, degree of
competition has no effect on the power imbalance (b31 =
0.049, NS). Thus, H7 was not supported.
The effect of transaction specific investments by a
retailer on the degree of competition in the vendor market
(b21 = -0.05, NS) was not significant. Thus, H6 was not
supported.
The relationship between transaction specific
investments by a retailer and vendor, and power imbalance as
proposed in H8 was not supported. Specifically, the
interaction between transaction specific investments by

177
retailer and vendor on the power imbalance between the dyads
was not significant. As a result of the nonsignificance of
the interaction term, a main effect model which included both
the transaction specific investments by the retailer and
vendor was tested. The main effect model indicated that
transaction specific investments by a vendor had a
significant positive effect on power imbalance (b33 = 0.252,
p < 0.05) while transaction specific investments by a
retailer had a significant negative effect on power imbalance
(b32 = -0.257, NS)
Discussion of significant results
The significant results in this section were the effects
of power imbalance and transaction specific investments of a
vendor on a retailer's expectation of future interactions.
The results of this study indicate that power imbalance in a
dyad significantly reduces the retailer's expectation of
future interactions. This confirms the result obtained by
Anderson and Weitz (1989) in a conventional manufacturer-
sales agent dyad. Similar results have been obtained by
researchers in bargaining and negotiation using Prisoner's
Dilemma paradigm (Rubin and Brown 1975). Thus, power
imbalance in a dyad, at least in conventional channels, seem
to reduce the retailer's expectation of future interactions.
The second important result in this section deals with
the effect of transaction specific investment by a vendor in
a relationship. Transaction specific investments by a vendor

178
increase the retailer's expectation of future interactions.
In contrast, transaction specific investment by retailer do
not affect the retailer's expectation of future interactions.
Heide and John (1990) obtain similar results in an industrial
buyer - supplier dyad. Specifically, the investments by the
supplier increased the perception of continuity while
specific investments by OEM's had no effect on the
expectations of continuity. These results suggest that
transaction specific investments by a vendor or supplier
provide strong signals to the retailer or buyer that the
vendor is interested in a long-term relationship.
Another interesting result deals with the effect of
transaction specific investments by a vendor on power
imbalance. Transaction specific investments by a vendor
increase the perception of power imbalance between a retailer
and vendor. However, power imbalance has a negative effect on
retailer's expectation of future interactions. In other
words, transaction specific investments by vendor reflect
power imbalance leading to a decrease in future interactions.
This is in direct contrast to the earlier result, which
indicated a positive relationship between transaction
specific investments by a vendor on retailer's expectation of
future interactions. A test of the two models indicates a
stronger direct positive effect of transaction specific
investments of a vendor on retailer's expectation of future
interactions rather than an indirect effect through power
imbalance. In other words, transaction specific investments

179
by vendors are perceived as strong signals towards the
development of a long-term relationship rather than
investments which create power imbalance in the dyad.
Discussion of nonsignificant results
Out of the eight hypotheses proposed, one was fully
supported (H5) and two were partially supported (H3 and H8).
Neither hypothesis focussing on the effects of environmental
uncertainty on a retailer's expectation of future
interactions was supported (Hi and H2). This result is not
surprising because of the large number of studies in channels
of distribution which have resulted in insignificant results
for the effect of environmental uncertainty. A possible
explanation is that the dimensions of environmental
uncertainty are not narrowly specified. A typology of
uncertainties with respect to customers, products,
technology, competition etc. is likely to delineate the
proper effect of environmental uncertainty on expectation of
future interactions.
Contrary to economic predictions, the degree of
competition in the vendor market had no effect on a
retailer's expectation of future interactions (H4) or on the
power imbalance (H7). One possible explanation for the lack
of significant results is the measurement of competition in
the vendor market rather than competition in both the vendor
and retailer markets. In other words, competition in the
vendor market alone does not determine the power imbalance or

180
the retailer's expectation of future interactions.
Presumably, an additive effect which includes the competition
in the vendor and retailer markets is likely to provide
strong results for the proposed hypothesis. Another
explanation for the null result is that the retailers are
interested in stable future interactions with vendors in
spite of a competitive vendor market.
Transaction specific investments by a retailer do not
significantly affect retailer's expectation of future
interaction and power imbalance (H3 and H8). The implications
of this result have been addressed in the previous section.
Conclusion
A retailer's expectation of future interactions with a
vendor is affected by the extent to which the vendor invests
in specific assets dedicated to the relationship and the
extent of power imbalance in the relationship. Transaction
specific investments by the vendor significantly increase the
retailer's expectation of future interactions while power
imbalance significantly reduces the expectation of future
interactions. Environmental uncertainty and the degree of
competition in the vendor market do not affect the retailer's
expectation of future interactions.

181
Retailer's Long-Term Orientation
Summary of the results
The conceptual model indicating the antecedents of long¬
term orientation is shown in Figure 5-2a. The correlation
matrix of the variables involved in the model is shown in
Table 5-3. The series of OLS regressions used to estimate the
model along with the estimated coefficients are shown in
Table 5-4. All the hypotheses in this section, except H9 and
H14 are supported.
As hypothesized, vendor's long-term orientation (b4i =
0.341, p < 0.01), retailer's trust in the vendor's
representative (b42 = 0.216, p < 0.01), retailer's
satisfaction with previous outcomes (b44 = 0.178, p < 0.01),
retailer's expectation of future interactions (b45 = 0.245, p
< 0.01), and dependence of a retailer on vendor (b46 = 0.228,
p < 0.01) significantly affect retailer's long-term
orientation. All the regression coefficients are significant
at the 0.01 level and the signs associated with beta
coefficients are in the proposed direction. Retailer's trust
in a vendor organization (b43 = 0.02, NS) and the dependence
of a vendor on a retailer (b47 = -0.048, NS) do not
significantly affect the retailer's long-term orientation.
The antecedents of retailer's long-term orientation explained
69% of the total variation in retailer's long-term
orientation.

182
Along with the direct effect of various antecedents on
long-term orientation, the model in Figure 5-2 focuses on the
effect of various antecedents of retailer's long-term
orientation on other antecedents. All 5 hypotheses (H15, H16,
H22, H23, and H24) proposed in this section were supported.
Vendor's long-term orientation significantly affected both
the retailer's trust in the vendor's representative (b6l =
0.609, p < 0.01) as well as the trust in vendor's
organization (b51 = 0.462, p < 0.01). Retailer's satisfaction
with previous outcomes significantly affected retailer's
trust in a vendor's representative (b63 = 0.367, p < 0.01)
and the vendor's organization (b53 = 0.376, p < 0.01).
Figure 3-4 indicates a set of subsidary relationships.
The results indicate that power imbalance has no effect on a
retailer's trust in the vendor's representative (b62 = 0.045,
NS) or the vendor's organization (b52 = 0.07, NS). Thus, the
result provides no support for hypotheses H17 and H18.
Transaction specific investments by a retailer increase
the dependence of the retailer on a vendor (b7i = 0.465, p <
0.01) and transaction specific investments by a vendor
significantly increase the vendor's dependence on a retailer
(bsi = 0.389, p < 0.01), thus supporting hypotheses H19 and
H20. Finally, transaction specific investments by a vendor
increase the vendor's long-term orientation (bgi = 0.516, P <
0.01) supporting H21.

183
Discussion of significant results
One of the significant results in this section pertains
to the effect of trust on retailer's long-term orientation.
Anderson and Weitz (1989) found in a study of manufacturer -
salesagents dyads that an agent's trust in their principal
(manufacturer) significantly affected the agent's
expectations about the continuation of the relationship. In
spite of this significant effect, it was not clear whether
the trust measured in the Anderson and Weitz study, captured
trust between an agent and the manufacturer at an individual
or organizational level. In other words, it is not clear
whether the trust of the agent in the study measured agent's
trust in the manufacturer's representative (individual level
trust) or the agent's trust of the manufacturer's
organization. This dissertation is the first study which
distinguishes between trust at an individual and
organizational level. The results from this study indicate
that in a retailing context, trust in a vendor's
representative plays a significant role in determining a
retailer's long-term orientation rather than the retailer's
trust in the vendor organization. This result is quite
surprising considering the emphasis of channels research on
organizational properties of a channel relationship (see
Stern and El-Ansary 1988) to the detriment of individual
aspects of a channel relationship. The results of this study
indicate that more emphasis should be placed by retail

184
managers in training retail buyers and their vendors to
develop trustful relationships.
Satisfaction with a channel relationship has been the
focus of many studies in channels of distribution (Anderson
and Narus 1984; Dwyer 1980; Ruekert and Churchill 1984).
However, most of these studies have focussed on satisfaction
as a dependent or outcome variable. In this study,
satisfaction in previous periods is used as an independent
variable affecting a retailer's long-term orientation.
Results from this study show that satisfaction with past
outcomes increases a retailer's long-term orientation. Some
support for this result has been found in romantic
relationships where satisfaction with the relationship
positively affected the commitment of both partners to the
relationship (Rusbult et al. 1991).
Another interesting result from this study deals with
the effect of vendor's long-term orientation. Vendor's long¬
term orientation has a significant positive effect on a
retailer's long-term orientation. There has been no previous
study in marketing which has focussed on the development of a
long-term relationship as a function of the perceptions of
one channel member towards another. Further, the transaction
specific investment of the vendor has a direct positive
effect on the vendor's long-term orientation. This confirms
the earlier conclusion that investment in transaction
specific assets by a vendor send strong signals to the

185
retailer that the vendor is interested in developing a long¬
term relationship.
Discussion of nonsignificant results
The interaction between a retailer's expectation of
future interactions and individual and organizational level
trust, on the retailer's long-term orientation was not found
to be significant. This indicates lack, of support for the
interaction hypothesis predicted in H13 and H14. As a result
of the lack of significance, a main effects model was tested.
The main effects model indicated a significant effect of a
retailer's expectation of future interactions on the
retailer's long-term orientation. This result is quite
different from studies in bargaining (such as Gruder 1971)
which have shown that expectation of future interactions
alone is not a sufficient condition for cooperative behavior
or positive attitude towards the partner; the partner should
be perceived as fair and nonexpliotative. The results from
this study seem to indicate that expectation of future
interactions may directly influence retailer's long-term
orientation. If one considers retailer's long-term
orientation as a function of the utility associated the long¬
term relationship and the valence towards the partner, and
retailer's expectation of future interaction as the utility
of the relationship, then the results are not surprising.
However, the implications of this result should be taken with

186
some caution and future research should focus on delineating
the effects of the two variables.
The hypothesis dealing with the interaction effect of a
retailer's dependence on a vendor and the vendor's dependence
on a retailer, on a retailer's long-term orientation was not
supported. Since the interaction hypothesis was not
supported, a main effect model was used for analysis. The
main effect model proposed independent effects for the
retailer's dependence on a vendor and the vendor's dependence
on a retailer. The result obtained from the main effects
model are interesting. The first result concerns the
nonsignificance of the vendor's dependence on a retailer.
This is really surprising as the transaction specific assets
of the vendor affect the retailer's long-term orientation
indirectly through vendor's long-term orientation. The
transaction specific assets by the vendor increase the
dependence of a vendor on the retailer. However, dependence
of the vendor does not have a significant effect on a
retailer's long-term orientation. The explanation for these
results stems from a study by Heide and John (1990) . Heide
and John (1990) have indicated that dependence could occur
due to a number of factors such as the magnitude of exchange,
concentration of exchange, role performance, and transaction
specific assets. The results in this framework, clearly
indicate that dependence arising out of transaction specific
investments significantly affect the retailer's long-term
orientation while dependence created through any other source

187
(such as lack of alternatives etc.) has no effect on the
retailer's long-term orientation.
The results for the effect of retailer's dependence on a
vendor on the retailer's long-term orientation show a pattern
of results opposite to the one encountered above. The
transaction specific investments of a retailer do not have a
significant effect on the retailer's long-term orientation
while the dependence of a retailer on the vendor has a
significant effect on the retailer's long-term orientation.
Thus, retailers who are dependent on their vendors,
irrespective of the source of their dependence, strive
towards developing long-term relationships. The results
indicate an asymmetry in how retailers view their own
dependence versus those of the vendors.
Another interesting result is that power imbalance has
no significant effect on either the individual level trust or
organizational level trust. Power imbalance lowers the
expectations of future interactions with vendors. This result
suggests that trust can develop even in retailer-vendor dyads
which have an imbalanced power structure.
Conclusion
Retailer's long-term orientation is significantly
affected by the vendor's long-term orientation, retailer's
trust in a vendor's representative, retailer's expectation of
future interactions, the dependence of a retailer on the
vendor, and retailer's satisfaction with previous outcomes.

188
Retailer's long-term orientation is not affected by the
retailer's trust in a vendor organization, and the extent to
which the vendor depends on the retailer.
Retailer's Initial Offer
Summary of the results
The conceptual model describing the effects of
retailer's and vendor's long-term orientation on retailer's
initial offer is shown in Figure 5-3. The correlation matrix
of the variables involved is indicated in Table 5-5. The set
of OLS regression equations used to estimate the model along
with the estimated regression coefficients are shown in Table
5-6.
The conceptual model for a retailer's initial offer
depends on whether a retailer or the vendor makes the initial
offer. As a result, the data was split into two groups based
on whether the vendor or retailer made the initial offer. The
model 3-5a was analyzed using data where the retailer made
the initial offer. Model 3-5b was analyzed using data where
the vendor made the initial offer.
In the model where the retailer made the initial offer,
retailer's initial offer (relative to own aspiration level)
was significantly affected by vendor's long-term orientation
(b102 = -0.55, p < 0.05), which supported H26. This result
indicates that if a vendor is perceived to be long-term
oriented, the retailer's initial offer is closer to the

189
retailer's true aspiration level. However, retailer's long¬
term orientation did not have a significant effect on
retailer's initial offer (bio1 = -0.05, NS) as predicted in
H25.
In a situation where the vendor makes the initial offer,
vendor's initial offer was significantly related to
retailer's initial offer (fc>n3 = 0.627, p < 0.01) supporting
H27. This indicates that if a retailer perceives a vendor's
initial offer to be close to the vendor's true aspiration
level, the retailer reciprocates such offers. Both H29 and
H28, which investigated the effect of vendor's long-term
orientation on retailer's and vendor's initial offer were not
supported (bn2 = 0.023, NS and bi2l = 0.023, NS). Further,
retailer's long-term orientation had a significant effect on
retailer's initial offer (bn2 = -0.241, p < 0.10).
Discussion of significant results
The results from this study offer interesting insights
into the nature of initial offers made by retailers and
vendors. Past research in the area of bargaining has shown
that bargainers make initial offers which exceed their
aspiration level considerably and trade concessions from such
high initial offer (Dwyer and Walker 1981; Pruitt 1981). The
results from this study indicate that such a pattern of
initial offers above the aspiration level may occur in short¬
term relationships rather than in long-term relationships.

190
When the retailer makes an initial offer, vendor's long¬
term orientation is negatively related to the retailer's
initial offer. In other words, a retailer's perception that a
vendor is long-term oriented, results in an initial offer by
the retailer which is close to the retailer's aspiration
level. This suggests that some of the research in bargaining
which has found a significant effect of variables such as
power imbalance on a bargainer's initial offer may be
moderated by the orientation of the bargainers towards a
long-term relationship. This study suggests that the extent
to which a vendor is perceived to be long-term oriented may
be a strong predictor of the retailer's initial offer even in
situations where there is a power imbalance between the
channel partners. Also, the results indicate that when a
vendor is perceived to be long-term, very little game playing
occurs between a retailer and the vendor.
When a vendor makes an initial offer, vendor's initial
offer is strongly related to a retailer's initial offer. The
results of this study confirm previous research in bargaining
which has shown that initial offers tend to be matched
especially if the initial offers tend to be tough or far
greater than the aspiration level (Axelrod 1984; Pruitt
1981). The surprising result in this study is that the
orientation of a retailer and vendor does not have a
significant effect on the retailer's initial offer. This
suggests that a vendor's initial offer plays a major role
even in long-term relationships.

191
Discussion of nonsignificant results
The results of the conceptual model shown in Figure 5-3
offer interesting insights into the nature of initial offers.
When a retailer makes the initial offer, the retailer's
initial offer is based entirely on the perception of vendor's
long-term orientation. The retailer's long-term orientation
does not affect the retailer's initial offer. This suggests
that participants in a dyadic relationship may place much
greater emphasis on a channel partner's orientation and
behavior rather than one's own orientation.
In contrast, when a vendor makes the initial offer,
vendor's long-term orientation is not a significant predictor
of retailer's initial offer. Vendor's overt behavior in the
form of an initial offer is the most important determinant of
a retailer's initial offer. This result is interesting
because vendor's long-term orientation seems to get
translated into expectations about the vendor's initial
offer. When a vendor's initial offer does not conform to
these expectations of a long-term oriented vendor, the
retailer resorts to game playing i.e increases the initial
offer.
Conclusion
In conclusion, the results in this section show that
even in long-term relationships, initial offers by vendors
and retailers play very important roles in determining the
process and outcomes of negotiations. Specifically, when a

192
retailer makes the initial offer, vendor's long-term
orientation plays a key role in determining the retailer's
initial offer. On the other hand, when a vendor makes the
initial offer, vendor's initial offer determines the
retailer's initial offer and the effect of vendor's long-term
orientation is insignificant.
Message Sending Behaviors and Disagreements
Summary of the results
The conceptual model describing the effects of a
retailer's initial offer on message sending behaviors of
retailers and vendors is depicted in Figure 5-4. The
correlation matrix of the variables involved in the
conceptual model is indicated in Table 5-7. The set of OLS
regression equations used to estimate the model along with
estimated regression coefficients are shown in Table 5-8.
As indicated in the conceptual model, a retailer's
initial offer (compared to their aspiration level) has a
significant negative effect on the vendor's integrative
messages (b]_32 = -0.25, p < 0.05) and a significant positive
effect on the vendor's distributive messages (bi42 = 0.175, p
< .10) supporting both H31 and H32.
The results also indicate that a vendor's integrative
message sending behavior is positively related to the
retailer's integrative message sending behavior (bi52 =
0.392, p < 0.01), supporting H33. As proposed, the

193
interaction between a vendor's distributive messages and
retailer's long-term orientation on retailer's distributive
messages was significant. To test H33 further, an analysis
equivalent to simple main effects was done on this
interaction (See Jacard ec al 1990). The moderator in this
situation was taken to be retailer's long-term orientation.
According to the results of the simple main effect analysis,
when retailer's long-term orientation was low (one standard
deviation below the mean), the slope of the relationship
between the vendor's distributive messages and retailer's
distributive messages was 0.877, which was significantly
different from zero. When retailer's long-term orientation
was medium (at the mean), the slope of the relationship
between the retailer's and vendor's distributive messages was
0.711, and when the long-term orientation was high (one
standard deviation above the mean), the slope was 0.545.
Although, all the slopes were significantly different from
zero, relationship between the vendor's and retailer's
distributive messages is strongest when the retailer's long¬
term orientation is at its minimum. This supports H34.
As proposed in the model, vendor's distributive messages
has a significant effect on the level of disagreements (bi7i
= 0.412, p < 0.01), while retailer's distributive messages
(bi72 = -0.064, NS) had no effect on the level of
disagreement providing partial support for H35. Both
retailer's integrative messages (bi73 = 0.065, NS) and
vendor's integrative messages (bi74 = -0.13, NS) were not

194
significantly related to the level of disagreements. Thus,
H36 was not supported.
Discussion of significant results
The results of this study offer strong insights into the
communication behaviors of retailers and vendors. Results of
this study indicate that vendor's integrative messages get
reciprocated irrespective of a retailer's orientation (i.e.
short-term or long-term) while vendor's distributive messages
get reciprocated only if the retailer has a short-term
orientation. This confirms similar results obtained in
controlled experimental settings in the area of marital
interaction (Gottman 1979), labor-management negotiations
(Putnam and Jones 1982), and negotiations (Donohue 1981).
This study provides strong support to the above findings and
contradicts previous results in the area of distribution
channels. Frazier and Summers (1986) found that
manufacturer's use of coercive strategies was positively
related to the dealer's use of coercive strategies. However,
Frazier, Gill, and Kale (1989) found that coercive behaviors
by manufacturers do not get reciprocated by dealers in
developing countries where the dealers lack alternatives. The
Frazier et al. (1989) result suggests that power imbalance
between parties could play a moderating role in the
reciprocation of distributive behaviors. This dissertation
clearly demonstrates that long-term orientation is another

195
key moderating variable in the reciprocation of coercive
behaviors between channel members.
Another interesting result in this section deals with
the determinants of the level of disagreement between a
retailer and vendor. Previous studies in distribution
channels (Brown and Day 1981; Gaski 1984) have indicated that
the level of manifest conflict (overt behaviors rather than
an underlying state of incompatibility) is affected by the
use of coercive strategies by channel members. The results in
this study partially support this conclusion. Vendor's
distributive messages were found to increase the level of
disagreements while retailer's distributive messages had no
effect on the level of disagreements.
Another significant result indicated that a retailer's
initial offer was positively related to the vendor's
integrative and distributive messages. Specifically, a
retailer's initial offer was found to be positively related
to vendor's distributive messages and negatively to vendor's
integrative messages. In other words, initial offers close to
the retailer's aspiration level were found to result in
integrative messages while offers far above the aspiration
level were found to result in distributive messages. These
results are similar to those obtained in various studies in
bargaining using the Prisoner's Dilemma paradigm (Rubin and
Brown 197 5) . As Rubin and Brown (197 5) conclude, "Early
initiation of cooperative behavior tends to
promote...cooperative relationship; early competitive

196
behaviorinduce mutual suspicion and competition."
Therefore, the results of this study are consistent with the
results obtained in bargaining research focussing on the
impact of opening moves on the behavior of bargainers.
Discussion of nonsignificant results
Most of the hypotheses in this section were supported
except the ones relating a retailer's distributive messages
and both parties' integrative messages to the level of
disagreements. The nonsignificance of the retailer's
distributive messages on the level of disagreement may
reflect the bias of the retailer in explaining the cause of a
disagreement. The results also suggest an attribution bias of
retailers towards blaming the vendors for all their
disagreements. Contrary to the proposed hypotheses,
integrative messages do not play a major role in mitigating
disagreements and only distributive messages affect the level
of disagreement. Recent studies in distribution channels
(Frazier and Rody 1991) have found that coercive strategies
of a supplier and distributor increased latent conflict while
noncoercive strategy by the supplier decreased latent
conflict. In spite of the partial support for the hypotheses
in this dissertation, other studies have found support for
similar hypotheses. Taking a dyadic perspective (i.e. using
the information from both the retailer and vendor) would
offer stronger test of the hypotheses in this section.

197
Conclusion
Results in this section indicate that a retailer's
initial offer is positively related to the vendor's
distributive messages and negatively related to the vendor's
integrative messages. Further, a vendor's distributive
messages get reciprocated only when the retailer is short¬
term oriented while the vendor's integrative messages get
reciprocated irrespective of the retailer's orientation
towards the relationship. Finally, a vendor's distributive
messages positively affect the level of disagreements between
the retailer and vendor.
Conflict Resolution Strategies
Summary of the results
The conceptual model describing the effects of the level
of disagreements on retailer's conflict resolution strategy
is depicted in Figure 5-5. The hypotheses are shown in Figure
3-9. The correlations between the variables are shown in
Table 5-9. The results of the analysis are given in Table 5-
10.
The test of the hypotheses was done through procedures
suggested by Jacc1 ard, Turisi, and Wan (1990) . These
procedures used multiple regression techniques and involved
forming multiplicative terms of the independent variables
(Cohen and Cohen 1983). These multiplicative terms encompass
l

198
the interaction effects. The first step in the data analysis
was to determine if a triple interaction was present between
retailer's long-term orientation, vendor's long-term
orientation, and the level of disagreement on various
conflict resolution strategies. All three conflict resolution
strategies i.e. problem solving, compromise, and aggressive
strategies showed significant three way interaction (p <
0.01). This suggests that the use of various conflict
resolution strategies by retail buyers under different levels
of disagreement is different. To test the proposed
hypotheses, the level of disagreement was defined at three
levels. High disagreement was defined as one standard
deviation above the mean, medium level of disagreement was
the same as the mean disagreement, and low disagreement was
defined as one standard deviation below the mean level.
The data were analyzed for all the three dependent
variables i.e. problem-solving, compromise, and aggressive
conflict resolution strategies. The results of the analysis
are shown in Table 5-10. For all the three dependent
variables, the two way interaction was significant at the low
disagreement level (p < 0.01). For compromise strategy, the
two way interaction was also significant at the medium level
of disagreement. The two way interactions were not
significant for the three dependent variables in the high
disagreement condition. Thus, H37, H38, and H39 which
predicted a two way interaction for all three conflict

199
resolution strategies for the high disagreement condition
were not supported.
However, the two way interactions at the low and medium
level of disagreements were further analyzed by isolating the
source of interaction through procedures akin to the simple
main effects analysis. The two way interaction between
retailer's long-term orientation and vendor's long-term
orientation at low level of disagreements for problem solving
strategy was analyzed. This analysis revealed that the slope
of the relationship between retailer's long-term orientation
and problem solving strategy was not significantly different
at different levels of vendor's long-term orientation (p >
0.05). This suggests that retailer's long-term orientation
does not have different slopes at low and high level of
vendor's long-term orientation.
In contrast to the above result, the two way interaction
between retailer's long-term orientation and vendor's long¬
term orientation at low level of disagreement on compromise
and aggressive strategies led to significant results (p <
0.01). The simple main effect analysis of the two way
interaction indicated that the slope of the relationship
between retailer's long-term orientation and compromise
strategy was significantly different at the two (high and
low) levels of vendor's long-term orientation (p < 0.001).
The analysis also indicated that the slope at high level of
vendor's long-term orientation for the relationship between
retailer's long-term orientation and compromise strategy was

200
significantly different from zero (p < 0.01). This suggests
that under low levels of disagreement, when both the retailer
and vendor have a long-term orientation, the retailer uses
compromise strategy as the primary method of solving the
conflict. Similar two-way interaction is obtained for the use
of compromise strategy by the retailer to solve conflicts in
medium disagreement situation (p < 0.05). The results of the
simple main effects indicate that the slope of the
relationship between retailer's long-term orientation and
compromise strategy is different at the two levels (high and
low) of vendor's long-term orientation. Specifically, under
high level of vendor's long-term orientation and medium
disagreements, the relationship between the retailer's long¬
term orientation and use of compromise strategy is positive
and significantly different from zero (p < 0.01). The results
from the two analyses indicate that when both retailers and
vendors are long-term oriented, under both low and medium
level of disagreements, retailers use compromise strategy to
resolve conflicts.
The two-way interaction between a retailer's long-term
orientation and vendor's long-term orientation under low
levels of disagreement for retailer's use of aggressive
strategy is significant (p < 0.05). The analysis of the two
way interaction indicates that the slope of the relationship
between retailer's long-term orientation and retailer's use
of aggressive strategy is positive and significantly
different from zero when the vendor is long-term oriented (p

201
< 0.01). The results suggest that under low levels of
disagreement, when the vendor is perceived as long-term
oriented, retailer's long-term orientation is positively-
related to the retailer's use of aggressive strategy.
However, when the vendor is perceived as short-term oriented,
the slope of the relationship between retailer's long-term
orientation and the use of aggressive strategy is negative
though not significant. Thus, the results suggest that when
both parties are long-term oriented, minor disagreements lead
to the use of aggressive strategies by the retailer.
When the two-way interactions are not significant for
all the three conflict resolution strategies, a main effects
model which included retailer's and vendor's long-term
orientation was used to predict the different conflict
resolution strategies. The main effect model for problem
solving strategy under medium and high level of
disagreements, indicated a significant main effect of
vendor's long-term orientation (p < 0.1) while the main
effect model for aggressive strategy under high disagreements
revealed a significant main effect of vendor's long-term
orientation (p < 0.05). The main effect model for retailer's
use of compromise strategy was not significant. The results
of the main effect models clearly indicate that under high
disagreements, vendor's long-term orientation plays a key
role in the retailer's use of problem solving and aggressive
strategies.

202
Discussion of significant results
One of the surprising results obtained in this section
refers to the use of compromise strategy by retailers in low
and medium level of disagreements. The results show that
retailers predominantly use compromise strategies when the
disagreements are minor and both parties have a long-term
orientation. Though channels research in marketing is replete
with studies using conflict as a construct, no study has
investigated the use of different conflict resolution
strategies under various relationship conditions. However,
research in the area of interpersonal relationships seems to
offer some support to the results obtained in this section.
Research has found that people who are involved in close
relationships behave cooperatively in conflicts, and avoid
power - related behaviors (Rusbult et al. 1991). The results
from this study indicate that when both parties are
interested in long-term relationship, conflicts should result
in cooperative behaviors. However, the current dissertation
extends this research by looking at the moderating effect of
levels of disagreement on different conflict resolution
strategies.
Another interesting result is the use of aggressive
strategy by retailers in low level of disagreements even when
both parties are oriented towards a long-term relationship.
Taken with the previous result which suggested that
compromise strategy is most prevalent, these results indicate

203
that retailers may in fact use multiple strategies during a
single negotiation encounter. The results indicate that the
conflict resolution strategies (problem solving versus
aggressive) are not on opposite poles of a single dimension
(as proposed by Graham et al. 1988) but that they are
independent strategies requiring greater or lesser degree of
use within a particular set of negotiations.
The final result in this section deals with the use of
problem solving conflict resolution strategy. Although the
two-way interactions for problem solving, compromise, and
aggressive strategies are not significant under high
disagreement condition, subsequent main effects analysis
suggest interesting results. First, under high disagreements,
vendor's long-term orientation has a positive effect on the
retailer's use of problem solving strategy (p < 0.1). This
suggests that a retailer uses vendor's long-term orientation
as a signal to use problem solving strategy. Similar results
are obtained for the retailer's use of aggressive strategy (p
< 0.01) which suggest that when retailers perceive the vendor
to be long-term oriented they are likely to use aggressive
strategy. In fact, the main effect of vendor's long-term
orientation on the use of aggressive strategy is positive.
There are two possible explanations for this result. The
first explanation suggests that retailers may be using both
problem solving and aggressive strategy simultaneously during
high disagreements to resolve conflicts. Although
contradictory, the use of aggressive and problem solving

204
approaches together has some support in bargaining
literature. Ben-Yoav and Pruitt (1984) found that bargainers
using positional commitments (which is defined in this study
as a part of aggressive strategy) along with problem solving
approach discovered integrative solutions leading to high
outcomes. According to the authors, positional commitments
allow bargainers to maintain high aspiration levels and thus,
protect against the collapse of demands in a bargaining
situation. Such positional commitments drive both parties to
extensively search for solutions which integrate the
requirements of both parties. Thus, the results obtained in
this study are to a certain degree consistent with the
simultaneous use of aggressive and problem solving approaches
in a bargaining encounter. Another explanation suggests that
the result obtained was a result of the desirability of
retail buyers to positively respond to questions dealing with
aggressive behavior. Thus, the impact of social desirability
on the use of aggressive strategy cannot be eliminated.
Future researchers should try to define aggressive strategies
carefully, and try to distinguish between different aspects
of an aggressive strategy such threats, positional
commitments and use of persuasive arguments.
Discussion of nonsignificant results
The study provides no support to the two-way
interactions under high disagreement condition for the use of
all the three conflict resolution strategies.

205
In spite of the lack of support for the predicted
hypotheses, the study has provided some interesting results.
As mentioned in the previous section, retailers seemed to use
compromise strategy for small and medium level of
disagreements when both parties were long-term oriented.
However, under high disagreement situation, retailer's long¬
term orientation has no effect on the use of compromise
strategy. In fact, the sign associated with the slope of
retailer's long-term orientation under high level of vendor's
long-term orientation is negative. A possible explanation for
this result is that high disagreement may indicate
disagreements on issues which are very important to the
concerned parties and use of compromise strategy in those
situations provides little benefit to both parties and may
lead to sub-optimal solutions.
In contrast to the results obtained for compromise
strategy, the use of problem solving strategy is prevalent in
high disagreement situations. Under high disagreements,
vendor's long-term orientation has a significant positive
effect on the retailer's use of problem solving strategy. In
low and medium disagreements, the effect of vendor's long¬
term orientation is not significantly different from zero.
Conclusion
The results in this study provide partial support to the
hypotheses proposed in this section. Specifically, compromise
and aggressive strategies seem to be used by retail buyers to

206
resolve minor and medium level conflicts or disagreements. In
contrast, problem solving and aggressive strategies are the
major conflict resolution strategies under high disagreement
condition.
Retailer and Vendor Concessions
Summary of the results
The conceptual model describing the effects of a
retailer's conflict resolution strategies on a retailer's and
vendor's concession is shown in Figure 5-6. The correlation
matrix of the variables involved in the conceptual model is
indicated in Table 5-11. The set of OLS regression equations
used to estimate the model along with estimated beta
coefficients are shown in Table 5-12.
The results of the analysis indicate that a retailer's
use of problem solving conflict resolution strategy in a
negotiation encounter significantly reduces the concessions
made by the retailer (bigi = -0.17, p < 0.05) but does not
significantly reduce the concessions made by the vendor (bigi
= -0.04, NS ). Thus, H40 was partially supported.
The results of the dissertation also indicate that the
retailer's use of compromise strategy significantly increases
the concessions made by the retailer (bi82 = 0.33, p < 0.01)
but does not significantly increase the concessions made by
the vendor (b]_92 = 0.118, NS). Thus, the results provide
partial support for H41.

207
Finally, the results of the dissertation also indicate
that the retailer's use of aggressive strategy significantly
increases the concessions made by the vendor (bi93 = 0.194, p
< 0.10) but does not affect the concessions made by the
retailer (bi83 = 0.084,NS). Once again, the results offer
partial support to H42.
Discussion of significant results
The results obtained in this study are consistent with
the research in bargaining. First, this study indicates that
the use of problem solving strategy by retailer significantly
decreases the concessions made by the retailer. Pruitt (1981)
and Rubin and Brown (1975) cite numerous studies which
conclude that when bargainers can communicate adequately,
problem solving approaches result in maximum outcomes. The
studies indicate problem solving approaches such as heuristic
trial and error (gradual concessions over time) produce high
outcomes even in situations where parties lack, trust in each
other. The result of this study confirms the expectation that
the retailer's use of problem solving strategies will result
in fewer concessions, and thus higher outcomes.
In contrast, use of compromise strategy results in
greater concessions by the retailer. Research in bargaining
has indicated that compromise on individual issues results in
lower outcomes than when bargainers employ a logrolling
strategy. In other words, compromise of both parties on the
same issue leads to suboptimal outcomes (Pruitt et al. 1980).

208
The result from this dissertation offers support to earlier
findings in the bargaining literature which indicate that
compromise strategies might result in sub-optimal solutions.
This result combined with result obtained from the previous
section offers interesting insights into the nature of retail
bargaining behavior. Results in the previous section
indicated that retail buyers are likely to use compromise
strategies to resolve minor conflicts. The results in the two
sections suggest that retail buyers may be aware of the
suboptimal outcomes obtained through the use of compromise
strategy and therefore, restrict the use of such a strategy
for minor conflicts. In fact, retailers might avoid using
problem solving strategy in minor conflicts because of the
greater cost in time and effort involved to obtain solutions
which satisfy both parties.
The results obtained regarding the use of aggressive
strategy are also consistent with findings in the bargaining
literature which indicate that successful use of threats and
compliance tactics result in higher outcomes to the party
making such threats (Rubin and Brown 1975). Several marketing
studies have shown that the use of distributive or aggressive
tactics result in higher outcomes when they are successful
(Dwyer and Walker 1980; Schurr and Ozanne 1984). The result
from this dissertation confirm results which indicate that
the retailer's use of aggressive strategy leads to higher
concessions by the vendor and has no effect on retailer's
concessions.

209
Discussion of nonsignificant results
Hypotheses 39 and 40 investigating the effect of problem
solving and compromising strategies adopted by a retailer on
retailer's and vendor's concessions were partially supported.
A possible explanation for insignificant effect of problem
solving and compromise strategies on vendor's concessions is
that the concessions of the vendor are based on the
retailer's perception. A measure of vendor's concessions as
perceived by the vendor would have resulted in a stronger
test of the hypotheses related to the vendor's concessions.
Conclusion
The results from this section provide strong support to
results obtained in the bargaining literature. Specifically,
the use of problem solving strategy by a retailer resulted in
lowering the concessions made by the retailer. The use of
compromise strategy by a retailer resulted in increasing the
concessions made by the retailer. Finally, the use of
aggressive strategy by a retailer resulted in increasing the
concessions made by the vendor.
Satisfaction with the Negotiations
Summary of the results
The conceptual model describing the effects of a
retailer's and vendor's concessions on retailer's
satisfaction with the negotiation is shown in Figure 5-6. The
correlation matrix of the variables involved in the

210
conceptual model is indicated in Table 5-13. The set of OLS
regression equations used to estimate the model along with
estimated beta coefficients are shown in Table 5-14.
Retailer's use of problem solving strategy was
positively related to retailer's- satisfaction with the
negotiation (b201 = 0.497, p < 0.01) while retailer's use of
aggressive strategy was negatively related to retailer's
satisfaction with the negotiation (b203 = -0.24, p < 0.05).
These results provide partial support to H43. However,
retailer's use of compromise strategy was not significantly
related to the retailer's satisfaction with negotiations
(t>202 = -0.11, NS). The sign of the regression coefficient
was opposite to the proposed hypothesis.
The results from this study also indicate that the
concessions made by the retailer are negatively related to
the retailer's satisfaction with the negotiation (b204 = *
0.19, p < 0.05) and the concessions made by the vendor are
positively related to the retailer's satisfaction with the
negotiations (b205 = 0.318, p < 0.01). These results provide
support to H44.
Discussion of significant results
Studies in distribution channels have found that channel
member satisfaction increases morale, cooperation between
parties, fewer termination of relationships, and reduced
litigation (Stern and El-Ansary 1988). However, very few
studies in distribution channels have focussed on the

211
determinants of satisfaction, specifically with respect to
negotiations.
The results in this dissertation offer interesting
insights into the determinants of retailer's satisfaction
with the negotiation. The results show that retailer's use of
problem solving conflict strategy has a direct positive
influence on retailer's satisfaction while aggressive
strategy has a direct negative influence on retailer's
satisfaction. This suggests that the conflict resolution
strategies used by the retailer are an important determinant
of satisfaction, even when the outcomes from the negotiation
are not considered.
The dissertation also supports previous research (Dwyer
and Walker 1981) which indicates that the satisfaction of the
bargainer is a function of the outcomes obtained by the
bargainer in the negotiation. In this dissertation , outcomes
are indicated by the extent of concessions made by the
retailers and vendors. The results confirm the previous
findings that satisfaction of a retailer with a bargaining
episode is dependent on the extent of concessions made by the
retailer and vendor.
Discussion of nonsignificant results
The only surprising result in this section deals with
the effect of retailer's compromise strategy on satisfaction
with the negotiation. Though retailer's use of compromise
strategy was not a significant predictor of satisfaction, the

212
sign of the regression coefficient was negative. This
suggests that the use of compromise strategy is negatively
related to the satisfaction of a retailer. The results of
this dissertation indicate that only the use of problem
solving strategy is positively related to retailer's
satisfaction and both compromise and aggressive strategies
are negatively related to retailer's satisfaction with the
negotiation.
Conclusion
The results of this section indicate that the use of
problem solving strategy is positively related to retailer's
satisfaction with the negotiation, while the use of
aggressive strategy is negatively related to retailer's
satisfaction. Further, concessions made by the retailer are
negatively related to retailer's satisfaction while the
concessions made by the vendor are positively related to
retailer's satisfaction. The results provide support for the
effect of both negotiation tactics and outcomes on retailer's
satisfaction with the negotiation.
Summary
The results of various analyses show support to most of
the hypotheses. The results show that retailer's long-term
orientation affects a retailer's initial offer, which in turn
significantly affects the messages sent by both parties
during the initial stages of the negotiation. The use of

213
different messages result in disagreements. The conflict
resolution strategy used by a retailer affects the retailer's
and vendor's concessions. The concessions made by retailer
and vendor are related to retailer's satisfaction with the
negotiations.

Fig 5-1: Antecedents of a Retailer's Expectation of Future Interactions
214

.367***
Fig. 5-2: Antecedents of a Retailer's Long-term Orientation
215

216
a) Retailer makes the initial offer
b) Vendor makes the initial offer
* p < 0.10
** p < 0.05
*** p < 0.01
Fig. 5-3
Antecedents of a Retailer's Initial Offer

Fig 5-4: Antecedents of Level of Disagreements Between Retailers and Vendors
217

218
Fig. 5-5: Determinants of a Retailer's Conflict Resolution
Strategy

* p < 0.10
** P < 0.05
*** p < 0.01
Fig. 5-6: Effect of Retailer's Conflict Resolution
Strategies on Retailer's and Vendor's
Concessions and Retailer's Satisfaction with
Negotiations
219

Table 5-1
Means, Standard Deviations and Correlations of Variables Affecting Retailer's Expectation of
Future Interactions
Variables
Mean
2. D.
PIMB
EDIV
EVOL
TSIR
TSIV NOVEN EFI
Power imbalance
4.60
1.19
-
Environmental
diversity
3.99
1.18
0.107
-
Environmental
volatility
3.72
0.78
-0.05
0.43***
-
Transaction specific
investments by
retailer
3.44
1.40
-0.085
-0.206**
-0.115
“
Transaction specific
investments by
vendor
4.49
1.42
0.196**
0.085
0.029
0.199**
Competion in the
vendor market
16.29
16.32
0.049
0.201**
0.079
-0.05
0.02
Expectation of
future interactions
5.90
1.08
-0.239***
0.05
-0.05
0.116
0.314*** 0.098
A
k k
k k k
p < 0.10
p < 0.05
p < 0.01
220

221
Table 5-2
Regression Equations and Estimated Standardized Coefficients
for Retailer's Expectation of Future Interactions
EFI = bio + bn PIMB + bi2 EDIV + bi3 EVOL + bi4 TSIR +
bl5 TSIR + bi6 NOVEN . ..: (1)
NOVEN = b20 + b21 TSIR (2)
PIMB = b30 + b3i NOVEN + b32 TSIR + b33 TSIV (3)
1.Dependent variable: EFI
F(6,115) = 5.382*** Adj. R2 = 0.18
Independent variables
PIMB
EVOL
EDIV
TSIR
TSIV
NOVEN
2.Dependent variable: NOVEN
F (1,120) = 0.305
Standardized coefficients
- 0.324***
-0.111
0.086
0.027
0.371***
0.100
Adj. R2 = 0.01
Independent variables
TSIR
3.Dependent variable; PIMB
F (1,120) = 0.284
Independent variables
Standardized coefficients
-0.05
Adj. R2 = 0.06
Standardized coefficients
0.049
0.257**
0.252**
* p < 0.10
** p < 0.05
*** p < 0.01
NOVEN
TSIR
TSIV

222
Legends
EFI
PIMB
EDIV
EVOL
TSIR
TSIV
NOVEN
Retailer's expectation of future expectations
Power imbalance
Environmental diversity
Environmental volatility
Transaction specific investment by retailer
Transaction specific investment by vendor
Degree of competition in the vendor market

Table 5-3
Means, Standard Deviations and Correlations of Variables Affecting Retailer's Long-term
Orientation
Mean
S.D.
EFI
INDTRS
ORGTRS SATOUT
VLTO
DEPROV DEPVOR RLTO
Expectation of
future
interactions
5.90
1.08
Trust in
vendor's
representative
5.133
1.01
0.351***
Trust in vendor
organization
5.137
1.024
0.307***
0.593***
-
Satisfaction
with past
outcomes
5.097
1.258
0.264***
0.367***
0.631***
Vendor's long¬
term orientation
5.69
0.85
0.353***
0.617***
0.673*** 0.527***
-
Dependence of
retailer on
vendor
4.62
1.31
0.404***
0.252***
0.187** 0.103
0.228**
Dependence of
vendor on
retailer
5.46
1.28
0.27***
0.392***
0.241*** 0.116
0.327 * * *
0.477***
Retailer's long¬
term orientation
5.463
0.935
0.578***
0.629***
0.601*** 0.533***
0.714 * * *
0.46*** 0.352***
* p < 0.10
** p < 0.05
p < 0.01
★ * *
223

224
Table 5-4
Regression Equations and Estimated Standardized Coefficients
for Retailer's Long-term Orientation
RLTO = b40 + b4i VLTO + b42 INDTRS + b43 ORGTRS +
b44 SATOUT + b45 EFI + b46 DEPROV + b47 DEPROV (4)
ORGTRS = b50 + b5l VLTO + b52 PIMB + b53 SATOUT (5)
INDTRS = b60 + bfíl VLTO + b62 PIMB + b63 SATOUT (6)
DEPROV = b7 0 + b71 TSIR (7)
DEPVOR = b80 + b81 TSIV (8)
VLTO = bgo + bgi TSIV (9)
4.Dependent variable: RLTO
F (7,112) = 39.111* Adj. R2 = 0.692
Independent variables Standardized coefficients
VLTO
INDTRS
ORGTRS
SATOUT
EFI
DEPROV
DEPVOR
5. Dependent variable: ORGTRS
F (3,116) = 49.862*
Independent variables
VLTO
PIMB
SATOUT
6. Dependent variable: INDTRS
F (2,117) = 36.315*
Independent variables
0.341***
0.216***
0.020
0.178***
0.245***
0.228***
-0.048
Adj. R2 = 0.552
Standardized coefficients
0.462***
0.07 0
0.376***
Adj. R2 = 0.373
Standardized coefficients
0.609***
0.045
0.367***
VLTO
PIMB
SATOUT

225
7. Dependent variable: DEPROV
F (1,122) = 33.742
Independent variables
TSIR
8. Dependent variable: DEPVOR
F (1,122) = 21.745
Independent variables
TSIV
9. Dependent variable: VLTO
F (1,122) = 44.169
Independent variables
TSIV
* p < 0.10
** p < 0.05
*** p < 0.01
Adj .
R2
= 0.21
Standardized
coefficients
0.465***
Adj .
R2
= 0.144
Standardized
coefficients
0.389***
Adj .
R2
= 0.26
Standardized
coefficients
0.516***
Legends
EFI
INDTRS
ORGTRS
SATOUT
VLTO
DEPROV
DEPVOR
RLTO
expectation of future interactions
trust in vendor's representative
trust in vendor's organization
satisfaction with past negotiation
Retailer's
Retailer's
Retailer's
Retailer's
outcomes
Vendor's long-term orientation
Dependence of the retailer on vendor
Dependence of the vendor on retailer
Retailer's long-term orientation

226
Table 5-5
Means, Standard Deviations and Correlations of Variables
Affecting Retailer's Initial Offer
a) When a retailer makes the initial offer
Variables
Mean
S • D i. • '
VLTO
RLTO RIORAL
Vendo r's long - term
orientation
5.577
0.793
-
Retailer's long-term
orientation
5.33
0.906
0.636***
-
Retailer's initial
offer w.r.t own
aspiration level
3.582
0.956
-0.405***
-0.319***
* p < 0.10
** p < 0.05
*** p < 0.01
B) When a vendor makes the
initial
offer
Variables
Mean
S.D.
VLTO
RLTO VIOVAL RIORAL
Vendor's long-term
orientation
5.8
0.84
-
Retailer's long-term
orientation
5.56
0.964
0.675***
-
Vendor's initial
offer w.r.t.
vendor's aspiration
level
3.27
0.948
0.048
-0.012
Retailer's initial
3.61
0.91
-0.178
-0.261 0.636***
offer w.r.t.
retailer's
aspiration level
* p < 0.10
** p < 0.05
*** p < 0.01

227
Table 5-6
Regression Equations and Estimated Standardized Coefficients for
Retailer's Initial Offer
RI0RAL1 = blOO + bioi RLTO + bi02 VLTO (10)
RIORAL2 = buo + bm RLTO + bH2 VLTO + bll3 VIOVAL (11)
VIOVAL = bl20 + bi21 VLTO (12)
10. Dependent variable: RIORAL1
F (2,49) = 5.02* Adj. R2 = 0.14
Independent
variables
Standardized
coeffecients
VLTO
-0.55**
RLTO
-0.05
11. Dependent
variable: RIORAL2
F(2,27)
= 11.594*
Adj. R2
= 0.42
Independent
variables
Standardized
coeffecients
VIOVAL
0.627***
RLTO
-0.241*
VLTO
0.023
12. Dependent
variable: VIOVAL
F (1,28)
= 0.02
Adj . R2
= 0.001
Independent
variables
Standardized
coeffecients
VLTO
0.023
* p < 0.10
** p < 0.05
*** p < 0.01
Legends
RIORAL1
RIORAL2
VIOVAL
VLTO
RLTO
Retailer's initial offer w.r.t. own aspiration
level when a retailer makes the initial offer
Retailer's initial offer w.r.t. own aspiration
level when a vendor makes the initial offer
Vendor's initial offer w.r.t. vendor's aspiration
level
Vendor's long-term orientation
Retailer's long-term orientation

Table 5-7
Means, Standard Deviations and Correlations of Variables Affecting the Retailer's Message
Sending Behavior and the Level of Disagreement
Variables
Mean
&JL.
RIORAL
VINT
VDIS
RINT RDIS DISAGR
Retailer's
initial offer
3.563
0.921
-
Vendor's
integrative
messages
4.656
1.04
-0.25**
Vendor's
distributive
messages
1.61
0.746
0.178
-0.245**
~
Retailer's
integrative
messages
5.77
0.826
-0.105
0.42***
-0.16
“
Retailer's
distributive
messages
1.896
0.915
0.128
-0.02
0.636***
-0.05
Level of
2.865
1.13
0.274**
-0.19**
0.391***
-0.001 0.204**
disagreements
* p < 0.10
** p < 0.05
*** p < 0.01
228

229
Table 5-8
Regression Equations and Estimated Standardized Coefficients for
Retailer's and Vendor's Message Sending Behavior and Level of
Disagreements
VINT = bl30 + bl3l RIORAL (13)
VDIS = bl40 + bi4i RIORAL (14)
RINT = biso + bisi VINT (15)
RDIS = b!60 + bi61 RLTO * VDIS (16)
DISAGR = bi70 + bi7i VDIS + bi72 RDIS + bi73 VINT +
bl74 RINT (17)
13. Dependent variable; VINT
F (1,7 9)
= 5.264**
Independent
variables
RIORAL
14. Dependent
variable:
VDIS
F (1,7 9)
= 2.583
Independent
variables
RIORAL
15. Dependent
variable:
RINT
F (1,79)
= 14.387
Independent
variables
Adj . R2
= 0.05
Standardized
coeffecients
-0.25**
Adj . R2
= 0.02
Standardized
coeffecients
0.178*
Adj. R2
= 0.14
Standardized
coeffecients
VINT
0.392***

16. Dependent variable: RDIS
Independent variables
230
VDIS
VDIS
VDIS
17. Dependent variable: DISAGR
F(4,91) = 4.697
Independent variables
Moderator
Slope
RLTO
(lsd below
mean)
0.877***
' RLTO
(At mean)
0.711***
RLTO
(lsd above
mean)
0.545***
Ad j . R2 = 0.14
Standardized coeffecients
RINT
0.065
RDIS
â–  -0.064
VINT
-0.130
VDIS
0.412
* p
< 0.10
* * p
< 0.05
* * ★ p
< 0.01
Legends
VINT
VDIS
RINT
RDIS
DISAGR
RIORAL
Vendor's integrative message sending behavior
Vendor's distributive message sending behavior
Retailer's integrative message sending behavior
Retailer's distributive message sending behavior
Level of disagreement between retailer and vendor
Retailer's initial offer w.r.t. retailer's own
aspiration level
Retailer's long-term orientation
RLTO

Table 5-9
Means, Standard Deviations and Correlations of Variables Affecting Retailer's Use of Various
Conflict Resolution Strategies
Variables
Mean
S.D.
DISAGR
RLTO
VLTO
PROBSOL COMPRO
Level of
disagreements
2.866
1.13
-
Retailer's long-term
orientation
5.463
0.935
-0.151
-
Vendor's long-term
orientation
5.69
0.847
-0.164
0.714***
-
Retailer's use of
problem solving
strategy
6.024
0.795
-0.205**
0.387***
0.396***
Retailer's use of
compromise strategy
4 .74
0.999
-0.078
0.24***
0.223**
0.376***
Retailer's use of
5.45
1.026
0.077
0.195**
0.223**
0.521*** 0.254**
aggressive strategy
★
* ★
it * *
p < 0.10
p < 0.05
p < 0.01

232
Table 5-10
Analysis of Retailer's use of Various Conflict Resolution
Strategies
Dependent variable: Retailer's use of problem solving strategy
1. Analysis of three-way interaction
Interaction Parameter Estimate
RLTO * VLTO * DISAGR -0.174***
2. Analysis of two-way interactions
Interaction Moderator Parameter Estimate
RLTO * VLTO DISAGR 0.293***
(Low: 1 sd below mean)
RLTO * VLTO DISAGR 0.097
(Medium: At mean)
RLTO * VLTO DISAGR -0.0999
(High: 1 sd above mean)
3. Analysis of simple main effects
a) Under Low Disagreement
Independent Variable Moderator Parameter Estimate
RLTO VLTO -0.115
(Low: 1 sd below mean)
RLTO VLTO 0.416*
(High: 1 sd above mean)
4. Analysis of main effects
a) Under medium disagreement
Independent Variable Parameter Estimate
RLTO
VLTO
0.183
0.159

233
b) Under high disagreement
Independent Variable Parameter Estimate
RLTO 0.216
VLTO 0.334*
Dependent variable: Retailer's use of compromise strategy
1. Analysis of three-way interaction
Interaction Parameter Estimate
RLTO * VLTO * DISAGR -0.244***
2. Analysis of two-way interactions
Interaction
Moderator
Parameter Estimate
RLTO * VLTO
DISAGR
(Low: 1 sd below mean)
0.554***
RLTO * VLTO
DISAGR
(Medium: At mean)
0.279***
RLTO * VLTO
DISAGR
(High: 1 sd above mean)
0.004
Analysis of simple main effects
a) Under Low Disagreement
Independent
Variable Moderator
Parameter Estimate
RLTO
VLTO
(Low: 1 sd below mean)
-0.108
RLTO
VLTO
(High: 1 sd above mean)
0.894***
b) Under Medium
Disagreement
Independent
Variable Moderator
Parameter Estimate
RLTO
VLTO
(Low: 1 sd below mean)
-0.01
RLTO VLTO 0.494***
(High: 1 sd above mean)

234
4. Analysis of main effects
a) Under high disagreement
Independent Variable Parameter Estimate
RLTO 0.09
VLTO 0.16
Dependent variable: Retailer's use of aggressive strategy
1. Analysis of three-way interaction
Interaction Parameter Estimate
RLTO * VLTO *
DISAGR
-0.246***
2.
Analysis of two-way interactions
Interaction
Moderator
Parameter Estimate
RLTO * VLTO
DISAGR
0.456***
(Low: 1 sd below mean)
RLTO * VLTO
DISAGR
0.179*
(Medium: At mean)
RLTO * VLTO
DISAGR
-0.100
(High: 1 sd above mean)
3.
Analysis of simple main effects
a) Under Low
Disagreement
Independent Variable Moderator
Parameter Estimate
RLTO VLTO -0.201
(Low: 1 sd below mean)
RLTO VLTO 0.624***
(High: 1 sd above mean)
b) Under Medium Disagreement
Independent Variable Moderator Parameter Estimate
RLTO VLTO -0.04
(Low: 1 sd below mean)
RLTO VLTO 0.282
(High: 1 sd above mean)

235
4. Analysis of main effects
a) Under high disagreement
Independent Variable
RLTO
VLTO
Parameter Estimate
0.03
0.519**
P
P
P
< 0.10
< 0.05
< 0.01
Legends
PROBSOL =
COMPRO =
AGGRES =
RLTO
VLTO
Retailer's use of problem solving conflict
resolution strategies
Retailer's use of compromise conflict resolution
strategy
Retailer's use of aggressive conflict resolution
strategy
Retailer's long-term orientation
Vendor's long-term orientation

Table 5-11
Means, Standard Deviations and Correlations of Variables Affecting Retailer's and Vendor's
Concession Behavior
Variables
Mean
S.D.
PROBSOL
COMPRO
AGGRES
RCNXIM VCNXIM
Retailer's use of
problem solving
strategy
6.024
0.795
-
Retailer's use of
compromise strategy
4.74
0.999
0.37 6* * *
-
Retailer's use of
aggressive strategy
5.45
1.026
0.521***
0.254**
-
Retailer's
concessions
18.01
7.69
-0.17
0.26**
0.08
-
Vendor's
17.40
8.01
0.104
0.134
0.19*
0.10
concessions
* *
★ * *
p < 0.10
p < 0.05
p < 0.01
236

237
Table 5-12
Regression Equations and Estimated Standardized Coefficients
for Retailer's and Vendor's Concession Behavior
RCNXIM = bi80 + bi81 PROBSOL + bi82 COMPRO + bl83 AGGRES (18)
VCNXIM = bigo + bigi PROBSOL + bi92 COMPRO + bi93 AGGRES(19)
18. Dependent variable: RCNXIM
F (3,85) = 3.119** Adj. R2 = 0.07
Independent variables Standardized coeffecients
PROBSOL
COMPRO
AGGRES
-0.17**
0.33***
0.084
19. Dependent variable: VCNXIM
F (3,85) = 1.423
Adj. R2 = 0.01
Independent variables
Standardized coeffecients
0.04
0.118
0.194*
* p < 0.10
** p < 0.05
*** p < 0.01
Legends
PROBSOL
COMPRO
AGGRES
RCNXIM
VCNXIM
PROBSOL
COMPRO
AGGRES
Retailer's concessions on various issues weighted
by the retailer's importance of these issues
Vendor's concessions on various issues weighted
by the vendor's importance of these issues
Retailer's use of problem solving conflict
resolution strategies
Retailer's use of compromise conflict resolution
strategy
Retailer's use of aggressive conflict resolution
strategy

Table 5-13
Means, Standard Deviations and Correlations of Variables Affecting Retailer's Satisfaction
with Negotiations
Variables
Mean
S. D.
PROBSOL
COMPRO
AGGRES
RCNXIM
VCNXIM
Retailer's use of
problem solving
strategy
6.024
0.795
-
Retailer's use of
compromise strategy
4.74
0.999
0.376***
-
Retailer's use of
aggressive strategy
5.45
1.026
0.521***
0.254**
-
Retailer's
concessions
18.01
7.69
-0.17
0.26**
0.08
-
Vendor's concessions
17.40
8.01
0.104
0.134
0.19*
0.10
-
Retailer's
5.11
1.34
0.245***
0.021
-0.03
-0.19*
0.282***
satisfaction with
negotiations
SATNEG
* ★
★ * ★
p < 0.10
p < 0.05
p < 0.01

239
Table 5-14
Regression Equations and Estimated Standardized Coefficients
for Retailer's Satisfaction with Negotiations
SATNEG = b200 + k>201 PROBSOL + b202 COMPRO + b203 AGGRES +
b204 RCNXIM + b205 VCNXIM (20)
20. Dependent variable: SATNEG
F (5,83) = 6.057*** Adj. R2 = 0.27
Independent variables Standardized coeffecients
PROBSOL
COMPRO
AGGRES
RCNXIM
VCNXIM
0.497***
-0.111
-0.239**
-0.192**
0.318***
* p < 0.10
** p < 0.05
*** p < 0.01
Legends
SATNEG =
PROBSOL =
COMPRO =
AGGRES =
RCNXIM =
VCNXIM =
Retailer's satisfaction with the negotiations
Retailer's use of problem solving strategy
Retailer's use of compromise strategy
Retailer's use of aggressive strategy
Concessions made by the retailer weighted by
retailer's importance of various issues
Concessions made by the vendor weighted by vendor's
importance of various issues

CHAPTER 6
DISCUSSION
Overview
This dissertation indicates that a key determinant of
negotiation behaviors in retail settings is the extent to
which retailers and vendors have a long-term orientation. The
results of this dissertation clearly demonstrate that a
retailer's long-term orientation affects the retailer's
initial offer, the communication behaviors during the
negotiation, the conflict resolution strategies employed by
the retailer, and finally the outcomes obtained by the
retailer from the negotiation. In spite of the numerous
conceptual papers on long-term relationships (Dwyer, Schurr,
and Oh 1986; Frazier, Spekman, and O'Neal 1989), this is the
first dissertation which looks empirically at the impact of
such an orientation on the behavior of channel members.
Contributions of the Dissertation
To the best of my knowledge, this dissertation is the
first empirical attempt to test the implications of long-term
relationships. Previous studies in marketing have either
conceptually addressed the characteristics of long-term
relationships (Dwyer et al. 1986) or empirically looked at
the antecedents of relational exchanges (Heide and John 1990;
Noordewier et al. 1990). However, no study has empirically
240

241
studied the antecedents of long-term relationships, the
dimensions of long-term relationships, and their subsequent
impact on negotiation process and outcomes.
The first part of this dissertation focussed on
developing a model of long-term orientation in retail setting
and empirically testing the relationship between long-term
orientation and its antecedent conditions. The first general
hypothesis in this section suggested that long-term
relationships emerge as responses to safeguarding transaction
specific assets and adapting to uncertainty. Overall, the
model showed reasonable support for the hypotheses involving
transaction specific assets of the vendor and the emergence
of long-term relationships. However, the effect of
uncertainty was not found. The second model in this section
extended this general hypothesis by including certain
relationship variables such as trust, satisfaction, and
perception of the vendor' long-term orientation. The general
hypothesis of this section, suggested that close
relationships emerge not only as a result of transaction
specific assets and uncertainty but also due to trust,
satisfaction and the extent to which the other party is
interested in developing a long-term relationship. All the
hypotheses in this sections were supported except for the
effect of organizational trust on long-term orientation.
Thus, this dissertation extends previous research in this
area (Heide and John 1990) by including relationship factors
along with transaction cost factors.

242
The next section of the dissertation focussed on the
effect of long-term orientation on the initial offers made by
a retailer and vendor. The overall conclusion from the
results obtained in this section indicate that initial offers
made by retailers and vendors are affected by the nature of
relationship. Specifically, retailers who are long-term
oriented make initial offers close to their aspiration levels
and do not indulge in game-playing (which involves deliberate
high initial offers and subsequent concessions from the high
initial offers).
The sections on message sending behavior and conflict
resolution offer strong insights into the nature of
bargaining in long-term relationships. First of all, the
results suggest that negotiations in a retailing context may
be much more complex than a bipolar integrative/distributive
perspective would seem to suggest. The results indicate that
even when vendors and retailers are long-term oriented, under
high disagreements, both problem solving and aggressive
strategies are used to a greater or lesser extent. In
contrast, under low disagreements, the use of compromise and
aggressive strategies seem to be the predominant modes of
conflict resolution. This is the first empirical study which
indicates that the use of problem solving, aggressive and
compromise strategies are moderated by the nature of
disagreements. In fact the use of compromise strategy in low
disagreements, and the use of problem solving in high
disagreements reflect a successful heuristic on the part of

243
retailers. Problem solving strategy requires searching for
solutions which satisfy the interests of both parties, and is
not a worthwhile strategy to use in minor disagreements
because of the high costs in time and effort required to
identify integrative solutions. In contrast, though the use
of compromise strategy might not yield high outcomes and lead
to sub-optimal solutions, its use in minor disagreements
suggests that retailers are willing to use compromise
strategy because of the lower effort and cost associated with
compromises on various issues. The costs associated with the
search for integrative solutions during minor disagreements
may far outweigh the benefits obtained through the use of
problem solving strategy; and consequently, the use of
compromise strategy. On the other hand, the use of problem
solving in high disagreements leads to solutions which
substantially increase the outcomes obtained by the
retailers. In other words, the payoffs associated with the
use of problem solving strategy for major disagreements is
far greater than the costs associated with the search for
integrative solutions.
Finally, although retailers use both aggressive and
problem solving strategies in solving major disagreements,
and both strategies lead to high outcomes (problem solving
strategy lead to lower concessions by the retailer while
aggressive strategy leads to higher concessions by the
vendor), the use of problem solving strategy is positively
related to the retailer's satisfaction with the negotiation

244
while aggressive strategy is negatively related to the
retailer's satisfaction with the negotiation. In other words,
though the retailer obtains high outcomes from using either
problem solving or aggressive strategy, the satisfaction is
much higher with the use of problem solving strategy. This
empirical result offers strong support to the use of problem
solving strategy for obtaining both high outcomes and
satisfaction with the negotiation encounter. In addition,
this also suggests that a retail buyer might deliberately
want to encourage the vendor to engage in problem solving
since this may lessen the vendor's use of aggressive
strategy. This might be accomplished by demonstrating an
ability and willingness on the part of the retailer to
problem solve early in the negotiation by developing some
specific proposals for consideration ( e.g., ideas for
increasing store displays, and cooperative advertising to
increase sales rather than introducing ideas such as markdown
money which focus on unsold inventory).
Directions for Future Research
The results of this dissertation indicate that the long¬
term orientation of a retailer affects the entire negotiation
process and outcomes. The results of this dissertation offer
interesting insights into the negotiation process and also,
raise several issues. This section deals with some of the
issues that need to be addressed by future researchers.

245
One of the interesting results obtained in this
dissertation deals with the type of strategies used by
retailers to resolve conflicts. The results indicate that
when both the retailers and vendors are long-term oriented,
the use of problem solving and aggressive conflict resolution
strategies seems to predominate especially when the
disagreements are major. In contrast, when retailers and
vendors are long-term oriented, but the disagreements are
minor, the use of compromise and aggressive strategies seem
to be high. These results indicate that a retailer's long¬
term orientation does not preclude the use of aggressive
strategies by retailers in retail bargaining. Therefore, one
important issue that needs to be addressed is the extent to
which different strategies (problem solving, aggressive, and
compromise) are used by retailers in a particular
negotiation. It is possible that bargaining strategies depend
on whether it is a new task (such as beginning of a season
buy) or mid-season task (e.g., when there is bargaining on
cooperative advertising). One possible explanation, is that
retailers use aggressive and problem solving strategies in
negotiations in the beginning of the season and use
compromise strategies for mid-season negotiations. Since,
this dissertation mainly focussed on the beginning of the
season negotiations, future research in this area should try
to differentiate between negotiations in the beginning of the
season and during the season.

246
Another possible research issue deals with the use of
certain conflict resolution strategies for particular issues.
For example, price negotiation could lead to the use of
aggressive strategy while issues such as delivery, quality,
displays and advertising support may lead to the use of
problem solving and compromise strategies.
Another research issue deals with the timing of
different strategies in a single bargaining encounter. One
could argue that during the initial part of a bargaining
encounter, a more aggressive posture is adopted by
negotiators even in a long-term relationship, simply because
the outcomes of the current bargaining would affect future
bargaining between the two parties. In other words, the use
of aggressive bargaining strategy in the initial stages may
be a strategic posture on the part of the bargainers. On the
other hand, retailers may tend to rely on problem solving
strategies in the initial phase of the negotiations to
establish potential benefits available in the relationship
before using aggressive strategies to determine how the
benefits should be distributed. Pruitt's (1981) studies seem
to provide more support for the earlier position (aggressive
strategy in the beginning) while Walton and McKersie (1965)
appear to lean towards the latter view (problem solving
strategy in the beginning). Future research should also
investigate the reasons for the use of aggressive and
compromise strategies in long-term relationships even though

247
these are not clearly the optimum strategies for such a
relationship.
Another issue which needs to be addressed deals with the
analysis of retailer-vendor dyadic data. This dissertation
uses the data obtained from the retailer, and future studies
should investigate the issues raised in this dissertation
from a dyadic viewpoint. Specifically, the effect of
communication tactics of the retailer on the vendor and vice
versa could provide valuable insights into the nature of
communication process between the retailer and vendor.
A final issue deals with developing a coding scheme for
capturing the negotiation interaction between retailers and
vendors. Very few studies have developed suitable means of
coding negotiation interaction to determine the use of
various communication tactics by negotiators. Donohue (1981)
has done preliminary work in this area. However, the validity
of Donohue's negotiation interaction category scheme needs to
be tested in retail situations.
Consequences for Practice
This dissertation provides an integrative framework of
the entire negotiation process and subsequent outcomes. The
results from this dissertation indicate that developing a
long-term orientation with a small number of vendors (or
retailers) may be the key to higher profitability.1 The
1 Although this dissertation does not measure profitability
per se, the measure of concessions by the vendors and

248
results indicate that when both parties are long-term
oriented, major conflicts are resolved by problem solving and
aggressive strategies. The use of problem solving and
aggressive strategies also result in lower concessions by the
retailer. However, the use of aggressive strategy by the
retailer reduces the satisfaction of the retailer with the
negotiations while the use of problem solving strategy
increases the satisfaction with the negotiation. In other
words, even though retailers use both aggressive and problem
solving strategies to resolve major conflicts, the use of
problem solving strategy results in higher outcomes and
satisfaction which is not obtained by the use of aggressive
strategy. These results offer a strong support for the
development of a long-term orientation in a retailer.
From a managerial perspective, the results indicate that
retailer managers need to inculcate a positive attitude in
retail buyers towards developing long-term relationships with
their vendors. This suggests that training programs in retail
establishments should focus on teaching the usage of problem
solving approach. Such programs could enhance the overall
profitability of both the retailers and vendors.
retailers may be considered a surrogate measure of
profitability. The measure of concessions focuses on 14
issues which exhaustively capture all the issues discussed in
retail negotiations. A true measure of profitability would
also consider the turnover of goods. The concessions as
measured in this dissertation do not capture the turnover of
goods but focus mainly on the margin associated with various
goods.

249
Limitations
The results and the implications of this dissertation
should be viewed in light of the research method employed.
Though the tests of the models yield several results that are
consistent with the hypotheses proposed in this dissertation,
the fact that a cross-sectional design was used limits the
ability to rule out alternative causal inferences.
For instance, the model in this dissertation is
predicated under the assumption that long-term orientation
plays a major role in the negotiation process and outcomes.
Though the results support this general hypothesis, it is
also conceivable that a reverse sequence of events is
operating. Specifically, the outcomes from the current
negotiation affect the negotiation process and long-term
orientation of the retailer. This dissertation attempts to
minimize the effect of this problem in two ways. One, the
dissertation was done in two phases. In the first phase the
orientation of the retail buyer towards long-term
relationship with the vendor was measured and in the second
phase the behaviors of the retailers in actual negotiations
were measured. Thus, the problem with reverse causality of
outcomes on antecedent constructs is eliminated. Second, the
retail buyer was asked questions in the sequence the
negotiations would have occurred. In other words, the first
part of the questionnaire focussed on initial offers, the

250
second on messages sent by both parties, the third part on
the level and intensity of disagreements, the fourth part on
the conflict resolution strategy employed by retailer, and
the final part dealt with the concessions made by retailer
and vendor. Presumably, this process would have eliminated
some of the effects of outcomes on the retailer's response to
various process measures. However, this dissertation does not
eliminate reverse causation through the effects of a
construct in previous negotiation on the current negotiation.
Such reverse causation cannot be eliminated without
longitudinal data.
Furthermore, this dissertation examines only one
dimension of long-term relationship i.e long-term
orientation. In particular, the dissertation does not include
any measures of relational norms (Dwyer et al. 1986; Kaufmann
and Stern 1988; Macneil 1980). An interesting extension of
the conceptual framework would include specifying the various
dimensions of long-term relationships in the model.
Another limitation of the study deals with the
restricted focus on a retail buyer's perspective of the whole
negotiations process. In spite of the problems created by a
one-sided perspective, this dissertation is consistent with
previous research in the channels of distribution. Previous
studies in marketing have looked at negotiations from a buyer
or a seller's viewpoint using an experimental setup (Dwyer
and Walker 1981; McAlister, Bazerman, and Fader 1986; Schurr
and Ozanne 1984). This dissertation extends this viewpoint by

251
being externally valid through the introduction of actual
retail buyers responding to questions dealing with issues
found in retailing.2 As part of the dissertation, data was
also collected from the vendor's viewpoint (and therefore,
both parts of the dyad). This dyadic data will be used in
subsequent research.
Summary
The results of this dissertation indicate that long-term
orientation in retail buyers results in higher outcomes. The
dissertation shows that retail buyers who are long-term
oriented and use problem solving conflict resolution
strategy, make fewer concessions, but are most satisfied with
the negotiation process and outcomes. The implications of
these results for managers in retail establishments are
enormous. Future training programs should focus on teaching
retail buyers the use of problem solving conflict resolution
strategies.
2 Future research based on this data will test hypotheses
dealing with the difference in long-term relationships and
negotiations across firms, time of season, nature of the
product etc. to provide stronger tests of external validity.

APPENDIX A
SURVEY OF RETAIL BUYERS: PART A
We are studying retailing department stores and their
resources, with the objective of better understanding these
relat nships. Financial support for this project is being
provided by the Center for Retailing at the University of
Florida.
We appreciate your assistance in answering a few
questions about your relationship with one of your vendors.
Our sample is limited and therefore your responses are
extremely important to us. Our pretests indicate that you
should be able to complete this questionnaire in about 30
minutes. The questions are short and simple. We are just
asking for your opinions and feelings, and there are no right
or wrong answers.
The information you give us will be completely
confidential. We will not reveal your responses to the vendor
or retailer. Any information we give out will be averaged
across many other retail buyers so that no one's answers can
be determined.
We would very much appreciate your completing the
questionnaire and returning it to us in the enclosed envelope
before vou go to market to negotiate with the vendor.
252

253
Thanks for your participation. In return for your
assistance, we will send you an executive summary of our
s tudy.
Dr. Barton A. Weitz
College of Business
University of Florida
Gainesville, FL 32611
(904) 392-7166
Shankar Ganesan
College of Business
University of Florida
Gainesville, FL 32611
(904) 392-2377

254
NAME OF RESOURCE:
Please make sure that it is the same resource you have selected on the
previous page. Indicate the extent to which you agree or disagree with
each statement below by circling the number that best expresses your
opinion. There are no right or wrong answers. We just want your opinion
on the relationship between you and this resource. Do not be concerned
about giving different answers to questions that seem similar.
ALL THESE QUESTIONS SHOULD BE ANSWERED WITH RESPECT TO THE
RESOURCE MENTIONED AT THE TOP OF THIS PAGE.
Strongly
Disagree
A) Characteristics of the resource
1. It would be difficult for us to replace
this resource 1 2 3 4
2. This resource's product lines are essential
to round out our product offering 1 2 3 4
3. We possess more power than this resource
in our relationship 1 2 3 4
4. We expect to continue buying goods from
this resource for at least several more
years 1 2 3 4
5. This resource has a reputation for being
honest 1 2 3 4
6. We are important to this vendor 1 2 3 4
7. We have made significant investments in
displays, trained salespeople etc.dedicated
to our relationship with this vendor 1 2 3 4
8. If we switched to a competing resource,
we would lose a lot of the investment we
have made in this resource 1 2 3 4
9. We are dependent on this resource 1 2 3 4
10. This resource is important to our
business 1 2 3 4
11. This resource is more powerful than us...1 2 3 4
12. The likelihood of this relationship
breaking down is high 1 2 3 4
13. This resource has a reputation for being
concerned about retailers 1 2 3 4
14. We are a major outlet for this vendor in
our trading area 1 2 3 4
Strongly
Agree
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7

255
Strongly
Disagree
15.This vendor has tailored its merchandise
and procedures to meet the specific needs of
our company 1 2 3 4
16. If we decided to stop working with this
resource, we would be wasting a lot of
knowledge regarding their method of
operation 1 2 3 4
17. There are many other resources who could
meet our requirements 1 2 3 4
18. This resource is crucial to our future
performance 1 2 3 4
19. We need this resource more than they
need us 1 2 3 4
20. We expect to interact with this resource
in future 1 2 3 4
21.If our relationship was discontinued with
this resource, we would have difficulty in
making up the sales volume in our
trading area 1 2 3 4
22. It is hard for a new vendor to adjust to
our requirements quickly 1 2 3 4
23. This resource has gone out of their way
to link us with their business 1 2 3 4
24. This resource has products which have a
strong customer franchise 1 2 3 4
25. We do not expect this relationship to
continue for long 1 2 3 4
26. If our relationship with this resource
was discontinued, the resource would have
difficulty selling their products in our
trading area 1 2 3 4
27. Our procedures (billing, order processing
etc.) are quite different from
our competitors 1 2 3 4
28. It would be difficult for this resource to
recoup its investment in us if they switched
to another retailer as an outlet
for their products 1 2 3 4
29.This resource's products generate a high
sales volume in my department 1 2 3 4
Strongly
Agree
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7

256
Strongly
Disagree
30. This resource has a bad reputation in
the market 1 2
31. This resource is not very important
to us 1 2
32. Our firm is closely linked with this
resource in the eyes of our customer1 2
33. We have invested a great deal in building
up this resource's business 1 2
34. We do not have a good alternative to this
resource 1 2
35. Most retailers would like to deal with
this resource 1 2
36. If our relationship was discontinued, we would
have difficulty replacing this resource 1 2
37. We have invested substantially in personnel
dedicated to this resource 1 2
B) Nature of the relationship
1. We trust this resource 1 2
2. This resource has been frank in dealing
with us 1 2
3. Promises made by this resource
are reliable 1 2
4. We are satisfied with the relationship with
this resource 1 2
5. If problems such as shipment delays arise,
this resource is honest about the problems..1 2
6. This resource is not open in dealing
with us 1 2
7. We do not have a good relationship with
this resource 1 2
8. This resource has gone out of its way
to help us out 1 2
9. We request a written letter backing up this
resource's promise 1 2
10. We like this resource 1 2
11. This resource has been consistent in terms
of their policies 1 2
Strongly
Agree
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7

257
Strongly
Disagree
12. We inspect all the goods supplied by
this resource carefully 1 2
13. This resource was fair to us in the past 1 2
14. This resource considers our interests
when problems arise ; 1 2
15. This resource cares for us 1 2
16. This resource always acts in its
self-interest 1 2
17. In the past the deals between this resource
and us have been fair to both parties 1 2
18. This resource has made sacrifices for
us in the past 1 2
19. I trust this resource's representative... 1 2
20. This resource's representative has been
frank in dealing with us 1 2
21. Most retailers think that this resource
has a reputation for being fair 1 2
22. Promises made by this resource's
representative are reliable 1 2
23. If problems such as shipment delays arise,
the resource's representative is honest about
the problems 1 2
24. This resource's representative is not open
in dealing with us 1 2
25. For the amount of inputs both parties have
put in, the benefits have been fair to both.l 2
26. This resource’s representative has often
gone out of his/her way to help us 1 2
27. We think this resource got more out of
the past deals than we have 1 2
28. This resource's representative does not
make false claims 1 2
29. I request a written letter backing up the
promises made by the resource's
representative 1 2
30. This resource's representative is knowledgeable
regarding his/her products 1 2
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
Strongly
Agree
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
3
4
5
6 7

258
Strongly Strongly
Disagree Agree
31. The resource's representative is always on
top of the things related to his/her job....l 23456
32. Over the years both this resource and us
have obtained nearly equal benefits 1 2 3 4 5 6 7
33. The resource's representative offers
innovative solutions to problems 1 2 3 4 5 6 7
34. The resource's representative has problems
answering our questions 1 2 3 4 5 6 7
35. I have a close relationship with the
resource's representative 1 2 3 4 5 6 7
36. The resource's representative is
like a friend 1 2 3 4 5 6 7
37. I like the resource's representative 1 2 3 4 5 6 7
38. We think we got more out of the past
deals than this resource 1 2 3 4 5 6 7
39. I check the statements made by the
resource's representative with other
sources 1 2 3 4 5 6 7
40. We like to settle all issues upfront
with this resource's representative 1 2 3 4 5 6 7
41. This resource's representative cares
for us 1 2 3 4 5 6 7
42. This resource's representative has made
sacrifices for us in the past 1 2 3 4 5 6 7
43. In times of shortages, this resource's
representative has gone out on a limb
for us 1 2 3 4 5 6 7
44. We feel the resource's representative
has been on our side 1 2 3 4 5 6 7
45. I believe the resource's representative..! 234567
46. The outcomes of negotiations with this
resource in the past have been better than
expected 1 2 3 4 5 6 7
47. The performance of this resource has been
better than expected 1 2 3 4 5 6 7

259
48. Considering all previous negotiations with this resource:
3 4 5 6
1 2
We came
out better
4 5
We both
benefitted equally
The resource
came out better
49. Describe your feelings with respect to the negotiation outcomes with
this resource in the past one year:
a. Pleased 1
b. Sad 1
c. Contented 1
d. Dissatisfiedl
34567 Displeased
34567 Happy
34567 Disgusted
34567 Satisfied
C) Orientation of the relationship
Strongly
Disagree
1. We would like to develop a long-term
relationship with this resource 1
2. We are willing to make sacrifices to help
this resource from time to time 1
3. We believe that over the long-run this
relationship will be profitable 1
4. Any concessions we make to help out this
resource will even out in the long-run 1
5. We focus on long-term goals in this
relationship 1
6. We share our long-term goals with
this resource 1
7. We expect this resource to be working with
us for a long time 1
8. Maintaining a long-term relationship with
this resource is important to us 1
9. We are only concerned with our outcomes
in this relationship 1
10. We would be wary of making long-term
concessions to this resource 1
11. We would not hesitate to replace
this resource 1
12. We are in search of alternative resources
to replace this resource 1
Strongly
Agree

Strongly
Disagree
13. We often play one resource against the
other to obtain the best possible deal 1 2
14. Our philosophy has been to obtain the
maximum benefits at the resource's expense..1 2
15. We look at each negotiation as a
win-lose situation 1 2
16. We deal with this resource season to
season as opposed to multiple seasons 1 2
17. We have to be under constant watch when
we deal with this resource 1 2
18. We buy from this resource to fulfill our
immediate needs 1 2
19. Once our short-term needs are fulfilled,
this resource has no future with us 1 2
20. Our relationship with this resource is
based on a need to fill up a gap in our
product assortment 1 2
21. Our relationship with this resource will
exist only as long as their products are
"hot" 1 2
22. Negotiating with this resource requires
a lot of planning on our part 1 2
23. We plan for a complete review of the
resource's performance 1 2
24. We have projections for future demand of
the resource's products before our
negotiations with them 1 2
25. If we do not prepare for this resource,
we are likely to get burnt during
the negotiations 1 2
26. This resource is interested in developing
a long-term relationship with us 1 2
27. This resource is willing to make sacrifices
to help us from time to time 1 2
28. This resource believes that over the
long-run their relationship with us will
be profitable 1 2
29. This resource believes that any concessions
they make will even out in the long run 1 2

261
Strongly
Disagree
Strongly
Agree
30. This resource is not concerned with
current outcomes
. . 1
2
3
4
5
6
7
31. The resource has long-term goals when
dealing with us
. . 1
2
3
4
5
6
7
32. The resource expects to be supplying for
a long time to us 1
2
3
4
5
6
7
33. Maintaining a long-term relationship with
us is very important to this resource 1
2
3
4
5
6
7
34. The resource is wary of making many
concessions to us
. . 1
2
3
4
5
6
7
35. The resource would not hesitate to stop
supplying to us
. .1
2
3
4
5
6
7
36. The resource has short-term goals with
respect to us
. .1
2
3
4
5
6
7
37. The resource looks at each negotiation
as a win-lose situation
. .1
2
3
4
5
6
7
38. The resource is careful when dealing
with us
. . 1
2
3
4
5
6
7
D) Market Conditions
1. How would you describe the market for the product vou buv from this
vendor compared to other
a) Complex 1 2
b) Stable 1 2
market
shares
c) Easy to 1 2
to monitor
trends
d) Few new 1 2
products
e) Stable 1 2
industry
volume
f) Sales 1
forecasts
are accurate
products in general?
3 4 5
3 4 5
3 4 5
3 4 5
3 4 5
6 7 Simple
6 7 Volatile
market
shares
6 7 Difficult
to monitor
trends
6 7 Many new
products
6 7 Volatile
industry
volume
7 Sales
forecasts
are inaccurate
2
3
4
5
6

262
g) Unpredi- 1
ctable demand
h) Few new 1
competitors
7 Predictable
demand
7 Many new
competitors
E) Buyer's profile
1.What category of merchandise do you buy for your company at present:
2. How many years experience do you have in buying merchandise for
retail organizations: years.
3. How many years experience do you have in buying merchandise for this
particular retail organization: years.
4. How many years experience do you have in buying merchandise in the
category of merchandise indicated above : years.
5. How many years experience do you have in buying merchandise from this
particular vendor: years.
6. How many resources do you currently deal with in the above mentioned
product category: .
7.What percentage of the volume in this category is accounted for by
this resource: %.
Thank you very much for completing this survey. As a part of this
project, we will be sending you a second questionnaire after your
negotiations with this resource. In order to mail this survey and a copy
of our results to you, we would like your name and address. Once again
all your responses will be totally confidential.
Name:
Address:
Ph. No.

APPENDIX B
SURVEY OF RETAIL BUYERS: PART B
Thank you for filling out the questionnaire related to
the first part of our project. In this last part of the
project, we would like you to answer a few questions on the
negotiations you have had with the resource recently. The
information you provide will be completely confidential; no
one will be provided access to your answers under any
circumstance. Any information we give out will be averaged
across other retail buyers to ensure complete confidentiality
of individual buyers.
We would very much appreciate your completing and
returning the questionnaire to us in the enclosed envelope
within two weeks. Since you have already completed the
first part of our project, your response to this
questionnaire becomes extremely important and
essential. Our pretests indicate that it will take about 30
minutes to respond to this questionnaire.
Once again we thank you for your participation in
the project. In return for your assistance, we will send you
an executive summary of our study.
Dr. Barton A. Weitz
College of Business
University of Florida
Gainesville, FL 32611
(904) 392-7166
Shankar Ganesan
College of Business
University of Florida
Gainesville, FL 32611
(904) 392-2377
263

264
Your name: Your firm:
In the first part of our project, you had described your relationship
with resource.
In this part of the project, we would like you to answer some
questions regarding the most recent negotiation you had with the
above resource. For example, you may have had negotiations with this
vendor recently for the summer or fall season merchandise. Please try to
remember the negotiation you had with this particular resource and
answer the following questions. We would like to remind you that all
your responses should pertain only to the above resource. Also, we are
just asking for your opinions and feelings, and there are no right or
wrong answers.
SECTION A: INITIAL OFFER
In this section, we are interested in the initial offers made by you and
the resource. Initial offer refers to the very first offer made by you
and the resource.
1. Did you make the initial offer?
Yes [If yes, go to page 3 and answer questions in Section A2
(retailer's initial offer) first. After finishing Section A2, come back
to Section A1 on this page Then answer questions 2 and 3 on pages 1 and
2. After completing this section, proceed to Section B].
No [If no, proceed to Section A1 (resource's initial offer) below
and answer all questions sequentially! .
SECTION Al: RESOURCE'S INITIAL OFFER
If the resource made the initial offer, answer questions 2 and 3 with
respect to that initial offer. If you made the initial offer, respond to
questions 2 and 3 with respect to resource's response to your initial
offer.
2. Please rate the resource's initial offer (or the resource's
response to your initial offer) with respect to your goals before the
beginning of negotiation
(If the resource did not make any explicit initial offer on a
particular issue, circle "NO"(No offer) and skip the issue]
No
Much
worse
Much
better
Offer
than
our
than
our
expectations
expectations
1)
Quality of the product
NO
1
2
3
4
5
6
7
2)
Price and Markup
NO
1
2
3
4
5
6
7
3)
Delivery
NO
1
2
3
4
5
6
7
4)
Gross margin
NO
1
2
3
4
5
6
7

265
No Much worse
Offer than our
expectations
Much better
than our
expectations
5) Exclusive selling rights
NO 1
2
3
4
5
6
7
6) Freight expenses
NO 1
2
3
4
5
6
7
7) Training
NO 1
2
3
4
5
6
7
8) Instore promotion
NO 1
2
3
4
5
6
7
9) Cooperative advertising
NO 1
2
3
4
5
6
7
10) Markdown money
NO 1
2
3
4
5
6
7
11) Full guarantee
NO 1
2
3
4
5
6
7
12) Quantity discounts
NO 1
2
3
4
5
6
7
13) Returns
NO 1
2
3
4
5
6
7
14) Premarking and packing
NO 1
2
3
4
5
6
7
3. Please rate the resource's initial offer
response to your initial offer) with respect
(or the
to your
resource'
Derceotion
S
of
the
resource's exDected final settlement
(If the resource did not make
particular issue, circle "NO"
an explicit initial
(No offer) and skip
. offer on a
the issue]
No Worst offer
Offer vendor could
make
Best offer
vendor could
make
1) Quality of the product
NO 1
2
3
4
5
6
7
2) Price and Markup
NO 1
2
3
4
5
6
7
3) Delivery
NO 1
2
3
4
5
6
7
4) Gross margin
NO 1
2
3
4
5
6
7
5) Exclusive selling rights
NO 1
2
3
4
5
6
7
6) Freight expenses
NO 1
2
3
4
5
6
7
7) Training
NO 1
2
3
4
5
6
7
8) Instore promotion
NO 1
2
3
4
5
6
7
9) Cooperative advertising
NO 1
2
3
4
5
6
7
10) Markdown money
NO 1
2
3
4
5
6
7

266
No Worst offer
Offer vendor could
make
Best offer
vendor could
make
11)
Full guarantee
NO
1
2
3
4
5
6
7
12)
Quantity discounts
NO
1
2
3
4
5
6
7
13)
Returns
NO
1
2
3
4
5
6
7
14)
Premarking and packing
NO
1
2
3
4
5
6
7
SECTION A2: RETAILER'S INITIAL OFFER
If you made the initial offer, respond to question 4 with respect to
that initial offer. If the resource made the initial offer, respond to
question 4 with respect to your response to that initial offer.
4. Please rate your initial offer (or your response to resource's
initial offer) with respect to vour final expected settlement
(If you did not make an explicit initial offer on a particular issue,
circle "NO" and skip the issue]
No
Much
worse
Much
better
Offer
than
our
final
than
our final
expectations
expectations
1) Quality of the product
NO
1
2
3
4
5
6
7
2) Price and Markup
NO
1
2
3
4
5
6
7
3) Delivery
NO
1
2
3
4
5
6
7
4) Gross margin
NO
1
2
3
4
5
6
7
5) Exclusive selling rights
NO
1
2
3
4
5
6
7
6) Freight expenses
NO
1
2
3
4
5
6
7
7) Training
NO
1
2
3
4
5
6
7
8) Instore promotion
NO
1
2
3
4
5
6
7
9) Cooperative advertising
NO
1
2
3
4
5
6
7
10) Markdown money
NO
1
2
3
4
5
6
7
11) Full guarantee
NO
1
2
3
4
5
6
7
12) Quantity discounts
NO
1
2
3
4
5
6
7
13) Returns
NO
1
2
3
4
5
6
7
14) Premarking and packing
NO
1
2
3
4
5
6
7

267
SECTION B: MESSAGES SENT BY YOU AND THE RESOURCE DURING NEGOTIATION
In this section, we want you to describe what went on during the
negotiations. Specifically, what kind of messages were sent by you and
the resource during the negotiations.
Retailer's message sending behaviors
Strongly
Disagree
1. We were frank in dealing with this
resource 1 2
3
4
5
Strongly
Agree
6 7
2. There were some things we were careful
about telling the resource 1
2
3
4
5
6
7
3. We communicated our priorities clearly
to the resource 1
2
3
4
5
6
7
4. We asked many questions about the resource's
priorities 1
2
3
4
5
6
7
5. We threatened to break off negotiations
with the resource 1
2
3
4
5
6
7
6. We indicated that we wanted to deal with
other resources 1
2
3
4
5
6
7
7. We made implicit threats to the resource... 1
2
3
4
5
6
7
8. We expressed displeasure with the resource's
behavior 1
2
3
4
5
6
7
9. We were committed to our initial position
during the negotiation 1
2
3
4
5
6
7
10. We commanded a better deal from the
resource 1
2
3
4
5
6
7
11. We emphasized the rewards available to both
parties from a successful deal 1
2
3
4
5
6
7
12. We kept the resource well informed of our
needs throughout the negotiation 1
2
3
4
5
6
7
13. We hesitated to give this resource a lot of
information 1
2
3
4
5
6
7
14. We indicated a need for both parties to be
fully satisfied 1
2
3
4
5
6
7

268
Perception of resource's message sending behavior
Strongly
Disagree
1. The resource was frank in dealing with us.. 1 2
3
4
5
Strongly
Agree
6 7
2. We felt that the resource was hiding some
thing from us
1
2
3
4
5
6
7
3. The resource communicated their priorities
clearly to us
1
2
3
4
5
6
7
4. The resource asked many questions about
our priorities
1
2
3
4
5
6
7
5. The resource threatened to break off
negotiations with us.
1
2
3
4
5
6
7
6. The resource indicated that they wanted to
deal with other retailers
1
2
3
4
5
6
7
7. The resource made implicit threats to us...
1
2
3
4
5
6
7
8. The resource expressed displeasure with our
behavior
1
2
3
4
5
6
7
9. The resource was committed to their initial
position during the negotiation
1
2
3
4
5
6
7
10. The resource commanded a better deal
from us
1
2
3
4
5
6
7
11. The resource emphasized the rewards
available to both parties from a
successful deal
1
2
3
4
5
6
7
12. The resource kept us well informed of their
needs throughout the negotiation 1
2
3
4
5
6
7
13. The resource hesitated to give us a lot of
information
1
2
3
4
5
6
7
14. The resource indicated a need for both
parties to be fully satisfied
1
2
3
4
5
6
7

269
SECTION C: DISAGREEMENTS AND RESOLUTION OF CONFLICTS
In this section, we want you to know if there were disagreements between
you and the resource and how you resolved these disagreements.
Importance of the issues
1. Please rate each of the following issues in terms of their
importance to you and the resource:
(Even if the issue was not negotiated , please respond to the question)
Importance
to you
Importance to the
resource
Unimportant
Very
Unimportant Very
important
important
1) Quality of the product 1 2
2) Price and Markup 1 2
3) Delivery 1 2
4) Gross margin 1 2
5) Exclusive selling
rights 1 2
6) Freight expenses 1 2
7) Training 1 2
8) Instore promotion 1 2
9) Cooperative advertising 1 2
10) Markdown money 1 2
11) Full guarantee 1 2
12) Quantity discounts 1 2
13) Returns 1 2
14) Premarking and packing 1 2
3 4 5 6 7
3 4 5 6 7
3 4 5 6 7
3 4 5 6 7
3 4 5 6 7
3 4 5 6 7
3 4 5 6 7
3 4 5 6 7
3 4 5 6 7
3 4 5 6 7
3 4 5 6 7
3 4 5 6 7
3 4 5 6 7
3 4 5 6 7
12 3
12 3
12 3
12 3
12 3
12 3
12 3
12 3
12 3
12 3
12 3
12 3
12 3
12 3
4 5 6 7
4 5 6 7
4 5 6 7
4 5 6 7
4 5 6 7
4 5 6 7
4 5 6 7
4 5 6 7
4 5 6 7
4 5 6 7
4 5 6 7
4 5 6 7
4 5 6 7
4 5 6 7

270
Time spent on issues
2. Please indicate the amount of time spent on discussing the issues
that were discussed during the negotiations.
[If you did not discuss a particular issue, please circle "ND"(Not
Discussed) and skip the issue]
Not
Very little
Discussed time
Most of
negotiations
1)
Quality of the product
NO
1
2
3
4
5
6
7
2)
Price and Markup
NO
1
2
3
4
5
6
7
3)
Delivery
NO
1
2
3
4
5
6
7
4)
Gross margin
NO
1
2
3
4
5
6
7
5)
Exclusive selling rights
NO
1
2
3
4
5
6
7
6)
Freight expenses
NO
1
2
3
4
5
6
7
7)
Training
NO
1
2
3
4
5
6
7
8)
Instore promotion
NO
1
2
3
4
5
6
7
9)
Cooperative advertising
NO
1
2
3
4
5
6
7
10)
Markdown money
NO
1
2
3
4
5
6
7
11)
Full guarantee
NO
1
2
3
4
5
6
7
12)
Quantity discounts
NO
1
2
3
4
5
6
7
13)
Returns
NO
1
2
3
4
5
6
7
14)
Premarking and packing
NO
1
2
3
4
5
6
7
Intensity of disagreements
3. Please rate the discussion between you and the resource on the
issues that were discussed in terms of the amount of disagreement and
the extent to which the discussion was conflictual
[If you did not discuss a particular issue, circle "ND" (Not Discussed)
and skip the issue]
Not
Discussed
No
Disagreement
Intense
Disagreement
Conflictual
Constructive
1) Quality of the
product
2) Price and Markup

271
Not
Discussed
No
Disagreement
Intense
Disagreement
Conflictual
Constructive
3) Delivery
ND
1
2
3
4
5
6
7
- 3
-2
-1
0
1
2
3
4) Gross margin
ND
1
2
3
4
5
6
7
-3
-2
-1
0
1
2
3
5) Exclusive selling
rights
ND
1
2
3
4
5
6
7
-3
â– 2
-1
0
1
2
3
6) Freight expenses
ND
1
2
3
4
5
6
7
-3
-2
-1
0
1
2
3
7) Training
ND
1
2
3
4
5
6
7
-3
-2
-1
0
1
2
3
8) Instore promotion.
ND
1
2
3
4
5
6
7
-3
-2
-1
0
1
2
3
9) Cooperative
advertising
ND
1
2
3
4
5
6
7
-3
-2
-1
0
1
2
3
10) Markdown money
ND
1
2
3
4
5
6
7
-3
-2
-1
0
1
2
3
11) Full guarantee
ND
1
2
3
4
5
6
7
-3
-2
-1
0
1
2
3
12) Quantity discounts
ND
1
2
3
4
5
6
7
-3
-2
-1
0
1
2
3
13) Returns
ND
1
2
3
4
5
6
7
• 3
-2
-1
0
1
2
3
14) Premarking and
packing
ND
1
2
3
4
5
6
7
•3
-2
-1
0
1
2
3
Conflict resolution
Strongly
Disagree
Strongly
Agree
1. We lean towards a direct discussion
of the problem with this resource 1 2
2. We avoid taking positions which would
create controversy 1 2
3. We try to find a compromise solution 1 2
4. We attempt to deal with all of our concerns
and the resource's concerns 1 2
5. We are firm in pursuing our goals 1 2
6. We try to soothe the resource's feelings
and preserve our relationship 1 2
3 4 5 6 7
3 4 5 6 7
3 4 5 6 7
3 4 5 6 7
3 4 5 6 7
3 4 5 6 7
7.We sacrifice our wishes for the wishes
of the resource 1 2 3 4 5 6 7

272
Strongly
Disagree
8. We seek the resource's help in working out
a solution 1 2
9. We try to do what is necessary to avoid
tensions 1 2
10. We attempt to get all our concerns and
issues out in the open 1 2
11. We share the problem with the resource so
that we can work it out 1 2
12. We tell the resource our ideas and ask them
for their ideas 1 2
13. We try to show this resource the logic
and benefits of our position 1 2
14. If it makes this resource happy, I let them
maintain their views 1 2
15. We postpone the issue to avoid dealing
with it 1 2
16. We attempt to work through our differences
as quickly as possible 1 2
17. We try to find a fair combination of
gains and losses for both of us 1 2
18. We will let this resource have some of their
positions if they let us have some of ours... 1 2
19. We try to find a position that is intermediate
between their position and our position 1 2
20. We try not to hurt the resource's
feelings 1 2
21. We are concerned with satisfying
all our wishes 1 2
Strongly
Agree
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7
22. We try to win our position 12 3
23. We make effort to get our way 12 3
24. We press to get our points made 12 3
25. We assert our wishes 12 3
26. We propose a middle ground 12 3
4
4
4
4
4
5 6 7
5 6 7
5 6 7
5 6 7
5 6 7

27 3
SECTION D: CONCESSSIONS MADE BY YOU AND THE RESOURCE
Finally, we want to know about the concessions made by you and the
resource in order to come to an agreement.
1. Please indicate the nature of concessions you made to the resource
on the following issues and the concessions made by the resource to you
[If you did not discuss a particular issue, circle "ND" (Not Discussed),
and skip the issue]
Concessions made
by you
Concessions made
by the resource
Made
very few
concessions
Made a
lot of
Made
very few
concessions concessions
Made a
lot of
concessions
1) Quality of the product 123
2) Price and Markup 123
3) Delivery 123
4) Gross margin 123
5) Exclusive selling
rights 123
6) Freight expenses 123
7) Training 123
8) Instore promotion 123
9) Cooperative advertising 123
10) Markdown money 123
11) Full guarantee 123
12) Quantity discounts 123
13) Returns 123
14) Premarking and packing 123
7
7
7
7
7
7
7
7
7
7
7
7
7
7
2
2
2
2
2
2
2
2
2
2
2
2
2
2
5
5
5
5
5
5
5
5
5
5
5
5
5
5
6
6
6
6
6
6
6
6
6
6
6
6
6
6
7
7
7
7
7
7
7
7
7
7
7
7
7
7

274
SECTION E: NEGOTIATION OUTCOMES
In this section, we want to know the final outcomes obtained by you and
the resource.
1.How would you rate the overall outcomes of this negotiation compared
to all the negotiations with this resource during the past one year;
Much Better 1 2
Same as all
previous
negotiations
3 4 5 6
Bad 1 2
Satisfactory 1 2
Inferior 1 2
3 4 5 6
3 4 5 6
3 4 5 6
7 Much Worse
7 Good
7 Unsatisfactory
7 Superior
2.How would you rate the outcomes of this negotiation compared to the
outcomes vou could obtain from the best alternative resource:
Much Better 1 2
Bad 1 2
Satisfactory 1 2
Inferior 1 2
Same as
outcomes from
alternative resources
7 Much Worse
7 Good
7 Unsatisfactory
7 Superior
3.How would you rate the outcomes of this negotiation compared to what
your competitors would have obtained (Give us your best estimate) ;
Much Better 1 2
Bad 1 2
Satisfactory 1 2
Inferior 1 2
Same as outcomes
obtained by competitors
3 4
3 4
3 4
3 4
5 6
5 6
5 6
5 6
7
7
7
7
Much Worse
Good
Unsatisfactory
Superior

Satisfaction with outcome
4.How satisfied are you with the outcomes of this negotiation.
Very Satisfied 123456 7 Very
Dissatisfied
Very Little 1 23 45 6 7 A lot
SECTION F: DIFFICULTY WITH RECALLING NEGOTIATIONS
In this section, we want to know about your reactions to this
questionnaire. Specifically, we want to know how difficult it was for
you to recollect all the information about the negotiation with this
particular resource.
1. I was able to recall the entire
negotiations with this resource..
Strongly
Disagree
1 2
Strongly
Agree
6 7
2.I was able to answer all the questions
without much difficulty 1 2 3 4
5 6 7
3.I was not able to recollect the initial
offer by the resource 12 3 4
5 6 7
4.I was not able to recollect my initial
offer to the resource 1 2 3 4
5 6 7
5.I had difficulty recalling the messages
that were sent by both parties 1 2 3
4 5 6 7
6.I had difficulty answering questions about
the messages sent by both parties 12 3
4 5 6 7
We thank you very much for participating in this study. We will be
sending you a copy of our executive summary in a couple of months.

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BIOGRAPHICAL SKETCH
Shankar Ganesan was born in Pattukkottai, a small town
in the southern part of India. After schooling stints in New
Delhi, Ahmedabad, and Calcutta, he embarked on an engineering
career. Amidst the confusion created by machine design,
thermodynamics and theory of machines, his thoughts began to
wander and he began to question the marketability of such
machines. His questions soon led him to the world of
marketing and selling. His initial stints in this direction
were in Ambalal Sarabhai Enterprises where he ended up
selling packaging machines. Pretty soon his interests in
marketing grew and led him to join the MBA program at the
Indian Institute of Management, Bangalore. After graduation
he continued in the field of marketing, specifically
computers, in Bangalore. The tremendous competition and the
inability to accurately predict a successful sale provided
the major impetus for doing a doctorate in marketing. This
dissertation is clearly an offshoot of the tough times he had
bargaining with his customers in Bangalore, India. Suffice to
say, he is still struggling with the intricacies of
negotiations.
289

I certify that I have read this study and that in my
opinion it conforms to acceptable standards of scholarly
presentation and is fully adequate, in scope and quality,
a dissertation for the degree of Doctor of Philosophy.
as
Barton A. Weitz, Chair
J.C. Penney Professor of
Marketing
I certify that I have read this study and that in my
opinion it conforms to acceptable standards of scholarly
presentation and is fully adequate, in scope and quality, as
a dissertation for the degree of Doctor
Richard
Professor of Marketing
I certify that I have read this study and that in my
opinion it conforms to acceptable standards of scholarly
presentation and is fully adequate, in scope and quality, as
a dissertation for the degree of Doctor of Philosophy.
b
Johfii G. Lynch, Jr.
Associate Professor of
Marketing
I certify that I have read this study and that in my
opinion it conforms to acceptable standards of scholarly
presentation and is fully adequate, in scope and quality, as
a dissertation for the degree of Doctor of Philosophy.
J
Richard Romano
Associate Professor of
Economics
This dissertation was submitted to the Graduate Faculty
of the Department of Marketing in the College of Business
Administration and to the Graduate School and was accepted as
partial fulfillment of the requirements for the degree of
Doctor of Philosophy.
May, 1991
Dean, Graduate School

UNIVERSITY OF FLORIDA
3 1262 08556 7195



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