effect of internet technology in the exporter-distributor relationship

7/31/2019 Effect of Internet Technology in the Exporter-distributor Relationship

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THE FLORIDA STATE UNIVERSITY

COLLEGE OF BUSINESS

THE EFFECT OF INTERNET TECHNOLOGY IN THE EXPORTER-DISTRIBUTOR

RELATIONSHIP

By

DAVID B. KUHLMEIER

A Dissertation submitted to the

Department of Marketingin partial fulfillment of the

requirements for the degree of

Doctor of Philosophy

Degree Awarded:Fall Semester, 2005


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The members of the Committee approve the dissertation of David B. Kuhlmeier defended on

October 03, 2005.

______________________________Gary A. KnightProfessor Directing Dissertation

______________________________

Lee Stepina

Outside Committee Memeber

______________________________

Larry Giunipero

Committee Member

______________________________Charles Hofacker

Committee Member

Approved:

________________________________________Gary A. Knight, Chair, Department of Marketing

________________________________________

Joe Nosari, Dean, College of Business

The Office of Graduate Studies has verified and approved the above named committee members.

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This work is dedicated to the memory of my mother and father for the life and name they gave

me; to my sister, Theresa C. Eggleston, for her unending support; but mostof all, to my three

gifts from God, Clayton, Thea, and Caroline.you three are my life. You never left me and I

will never leave you. I love you all.

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ACKNOWLEDGEMENTS

I would like to specifically acknowledge the following people for their contribution to

this dissertation and my doctoral education: Dr. Gary Knight for his friendship and mentorship;

all my committee members for their guidance, patience and understanding; Dr. Dennis Cradit for

his support throughout my Ph.D. quest; Dr. Tom DeWitt for his assistance in the structuring and

the wording of my manuscript; and Ms. Scheri Martin for her administrative miracle-making.

God bless you all.

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TABLE OF CONTENTS

List of Tables ...............................................................................................................................vii

List of Figures ..............................................................................................................................viiiAbstract ................................................................................................................................ix

1. INTRODUCTION ....................................................................................................................01

Chapter Introduction ........................................................................................................01

The Critical Relationship Between the International Firm and itsForeign Distributors ........................................................................................................02

The Nature of the Exporter-Distributor Relationship ........................................................03

The Internet ....................................................................................................................05

The Effect of the Internet on the Relationship Between the International Firmand its Foreign Distributors ............................................................................................07

Why This Study is Important/Motivation for the Dissertation ................................07

2. LITERATURE REVIEW AND HYPOTHESES ....................................................................09


Foundational Theory in International Business ........................................................09

Foundational Theory in the Relationship Between the Firm and itsDistributors/Distribution Theory ................................................................................10

Foundational Theory in the Use of the Internet ........................................................12

Key Constructs and the Proposed Relationships Among Them ................................13Use of Internet Technology ................................................................................15

Quality of Communication ................................................................................15

Quality of Relationship ................................................................................16

Distributor Motivation ................................................................................16Distributor Performance ................................................................................17

Hypotheses Development ............................................................................................17

The Internet ........................................................................................................17Summary ....................................................................................................................27

3. RESEARCH METHODOLOGY ............................................................................................28


Research Context ........................................................................................................28Research Design ........................................................................................................29

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Sample Characteristics ............................................................................................30Response Rate and Sample Characteristics ....................................................................31

Measures ....................................................................................................................32

Use of Internet Technology ................................................................................33Quality of Communication ................................................................................34

Quality of Relationship ................................................................................34Distributor Motivation ................................................................................35Distributor Performance ................................................................................36

Reliability and Validity Assessment ................................................................................36

Measurement Model Results ............................................................................................36

Hypothesis Testing ........................................................................................................41Analysis Plan ........................................................................................................41

Summary ....................................................................................................................44

4. RESULTS ................................................................................................................................45

Chapter Introduction ........................................................................................................45Principal Research Findings ............................................................................................45

Hypotheses Testing Results ............................................................................................46

Summary ....................................................................................................................50

5. DISCUSSION AND CONCLUSIONS ................................................................................51

Chapter Introduction ........................................................................................................51The Effect of Internet Technology Use on the Quality of Communication ....................51

The Effect of Quality of Communication on Distributor Motivation ................................52The Effect of Quality of Communication on the Quality of Relationship ....................53

The Effect of Quality of Relationship on Distributor Motivation ................................54

The Effect of Quality of Communication on Distributor Performance ....................55The Effect of Distributor Motivation on Distributor Performance ................................56

The Effect of Quality of Relationship on Distributor Performance ................................57

Managerial Implications ............................................................................................58Use of Internet Technology ................................................................................58

Quality of Communication ................................................................................58

Quality of Relationship ................................................................................59

Distributor Motivation ................................................................................59Distributor Performance ................................................................................59

Limitations of the Dissertation ................................................................................61

Recommendations for Future Research ....................................................................62

APPENDIX ................................................................................................................................65

REFERENCES ....................................................................................................................76

BIOGRAPHICAL SKETCH ........................................................................................................89

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LIST OF TABLES

1. Measurement Model Results: Model Fit, Internal Consistency, and Validity ....................372. Measurement Model Results: Standardized Measurement of Coefficients

and (t-values) ....................................................................................................................38

3. Standardized Loading Coefficients for the Measurement Model ............................................43

4. Results of the Hypothesized Relationships ....................................................................43

5. Summary of Hypothesis Tests for the Theoretical Model of the Effect of Internet

Technology on the Exporter Distributor Relationship ........................................................48

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LIST OF FIGURES

1. Hypothesized Relationships ............................................................................................42

2. Refined Structural Model of the Effect of Internet Technology on Distributor

Performance ....................................................................................................................49

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ABSTRACT

The effect of Internet technology use on the relationship between U.S. exporters and their

overseas distributors is investigated. This study examines the effects Internet technology may

have on the quality of communication, the quality of relationship, the level of distributor

motivation, and distributor performance. Results of a study of 261 exporting manufacturers from

across the United States suggests that Internet technology has a positive effect on the quality of

communication between exporters and distributors. However, for that increase in

communication quality to affect distributor performance, it must be mediated by either a)

distributor motivation through cooperation in the relationship, or b) commitment in the

relationship. Results also suggest that the role of trust in the exporter-distributor relationship

may not be as vital as previously thought. These results are discussed with regard to their

theoretical and practical implications.

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CHAPTER 1

INTRODUCTION

Chapter Introduction

The world economy has changed. At one time national economies could exist relatively

independently of other economies due to barriers such as distance, time, culture, national

domestic policies, and regulations. However, trade between nations has important direct and

indirect effects on national economies. Not only does it facilitate the flow of goods and services,

but it also diffuses culture and ideas around the world. Today these national economies are

merging into one integrated and interdependent system commonly referred to as globalization.

Although cross-border or international business has been present since the beginning of

civilization, its growth and its consequent globalization can be attributed to five basic factors

(Kotabe and Helsen, 2001). First, the saturation of the U.S. domestic market, which has forced

U.S. firms to look overseas for market growth. Second, the increase in multinational corporate

mergers and acquisitions that has, according to Kotabe and Helsen (2001), facilitated the

diffusion of information, ideas, and investments. Third, the change in the global competition

structure has resulted in the decline in the number of U.S. firms in the worlds top one hundred

largest firms. Fourth, changes in the world political and economic structure, with the fall of the

Soviet empire, the establishment of the European Union, and the signing of the North American

Free Trade Agreement as examples. Lastly, and perhaps most relevant to this study, the

proliferation of the Internet and electronic commerce.

The importance of international trade cannot be overstated. Even though larger, more

developed countries may have domestic sources from which to satisfy the needs of their

consumers, smaller and lesser developed countries must depend on foreign sources of goods and

services to satisfy all their needs. In general terms, the larger a countrys domestic economy, the

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less dependent it will be on imports and exports relative to its gross domestic product (GDP).

However, as proposed in David Ricardos Theory of Competitive Advantage, no country can

efficiently produce all of the goods and services it needs and must therefore trade with other

countries. In addition to trading with countries which can satisfy needs more efficiently, many

countries, especially richer countries such as the United States, depend on foreign sources to

satisfy the variety and quality of the goods and services they desire.

Failure to join the global market will lead to loss of economic influence for a country, a

decrease in the standard of living for its residents, and a loss of a driver for the creation of new

and better paying jobs. As a result, approximately 20% of the worlds total economic activity, or

$6.2 trillion, is merchandise exports (Griffin and Pustay, 2005). In the U.S., exports represent

13% of our gross domestic product (GDP). Quite simply, the business world, as we know it,

cannot exist without trade.

The Critical Relationship Between the International Firm and its Foreign Distributors

As a means of global market entry, exporting represents the first method by which firms begin

their involvement in international markets. Exporting not only provides a firm with a relatively

inexpensive means of accessing foreign markets for its goods and services, but it also allows a

firm to obtain valuable international experience and obtain needed economies.

Although the majority of export sales to date are conducted through independent

distributors, it is the function of the intermediaries, or middlemen in general that is important

to smaller companies which may not have the resources or experience to represent themselves

overseas. Overseas distribution via an intermediary does provide relatively inexpensive and

immediate representation in a foreign market, but it comes at the cost of reduced control by the

exporter because of its dependence on the foreign representative.

Any foreign intermediary will provide service to both the market customers (i.e. demand

side) and the exporting firm (i.e. supply side). For customers, an intermediary facilitates the

search process by making the product/service available and adjusts the discrepancy of assortment

between the manufacturer and the buyer by making the product or service available in the

desired quantity. For the exporting firm, the intermediary routinizes the purchase transaction and

reduces the number of contacts in the market (Coughlan et al., 2001). However, for the

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exporting firm the specific distribution tasks or flows (Coughlan et al., 2001) that are to be

performed in the market by the intermediary will be determined by the distribution objectives

that have been set by the firm, which will differ somewhat according to whether a consumer or

industrial market is being served. However, these tasks must be explicitly stated and can often

include functions in the following areas: inventory, delivery, credit, emergency service,

packaging, technical assistance, market information, advertising, order processing, and returns

(Rosenbloom, 2004). The extent and importance of these functions only underscore the

dependence of the exporter on its intermediary, especially when these important functions are

performed in a distant, challenging, and foreign environment. It therefore emphasizes the need

for an exporter to develop a strong working relationship with its foreign distributor.

For the purpose of this study, the term foreign distributor is an overseas agent of a U.S.

based manufacturer. It could include titles such as agent, distributor, sales representative, etc.

Thus the term foreign distributor will be used in a generic sense to refer to whatever entity has

the responsibility for the sale of the product in the designated foreign market. Specifically, it

will refer to the exporters most important distributor for its most important product in its most

important market. Also, whenever not specifically mentioned, the term distributor will refer to

aforeign distributor since this study focuses on exporting.

The Nature of the Exporter-Distributor Relationship

With the increasing globalization of the business environment and the resultant need for

firms to face competition in multiple markets has come a concomitant need for cross-border and

inter-firm relationships. Indeed, more manufacturers are opting for overseas distribution

partnerships in order to obtain various benefits, including the avoidance of both tariff and non-

tariff barriers, accessing needed resources and complementary marketing skills, and overall

reduction of the risks and costs that come with conducting business internationally (Kotabe and

Swan, 1995). Through these relationships the US exporter can penetrate foreign markets and

pursue growth that is not available domestically. However, such growth in sales or market is

dependent on the performance of the overseas partner. Many exporters are very dependent on

their channel intermediaries (Albaum et al., 1998; Root, 1994). Therefore the establishment and

maintenance of a long-term relationship with their partner is important to the exporting firm.

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The establishment and maintenance of this relationship is the responsibility of the firms

management.

In this context, the concept of relationship marketing pertains to Thorellis (1986)

network paradigm, which proposes that more and more of global competition takes place

between networks or alliances of firms. Morgan and Hunt (1994) refer to relationship

marketing as all marketing activities directed toward establishing, developing and maintaining

successful relational chain exchanges. The quality of such relationships, such as that of the

exporter and its distributor, revolves around concepts such as trust, commitment, and

cooperation.

With all the differences between foreign markets, such as distance, time, culture, legal

requirements, etc., and the very competitive and dynamic environment in which a distributor

must work, it is easy to understand why the concept of trust is important in the exporter-

distributor relationship. Among the many definitions of trust offered in the literature is that of

McAllister (1995) who says that trust is the extent to which a person is confident in, and willing

to act on the basis of the words, actions, and decisions of another. In organizational theory,

Hosmer (1995) refers to trust as the reliance by one person, group, or firm upon a voluntarily

accepted duty on the part of another person, group, or firm to recognize and protect the rights

and interests of all others engaged in a joint endeavor or economic exchange. Both refer to the

concepts of reliability and confidence in the other party. According to Doney and Cannon

(1997), trust is not limited to individuals, but can also be developed between organizations or

institutions (e.g. an exporting firm and its foreign distributor). To emphasize the importance of

the trust construct, Sherman (1992) concluded that the lack of trust was the biggest stumbling

block to the success of alliances.

Closely related to trust in the literature is the construct of commitment, which has been

defined by Moorman, Deshpande, and Zaltman (1993) as an enduring desire to maintain a

valued relationship. In a relationship it amounts to the belief that the relationship is important

enough to extend the effort to maintain it. The requirement of commitment is well recognized in

the export literature due to the time and effort it takes to develop an overseas market.

Both trust and commitment in a relationship require some degree of cooperation.

According to Anderson and Narus (1990) cooperation can be considered as two parties working

together toward a mutually beneficial goal. Van de Ven (1976) emphasizes this concept by

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referring to the goal of any inter-organizational relationship as the attainment of goals that are

unachievable by organizations independently. Clearly, for smaller firms that cannot afford to

represent themselves overseas, support and involvement of a local entity that is experienced in

the market is essential for successful export performance.

This study also analyzes other constructs that are closely related in the exporter-

distributor relationship and have important interactions with it. Communication has been

described by Mohr and Nevin (1990) as the glue that holds together a channel of distribution,

and consequently is considered in this study to be of paramount importance.

Foreign market distributors basically serve as the sales representatives for an exporter. In

any sales situation, it is one of managements major responsibilities to motivate its sales staff to

achieve established objectives and goals. Therefore motivation, which is defined by

Greenberg and Baron (1993) as the set of processes that arouse, direct, and maintain human

behavior toward attaining a goal, is also analyzed in the exporter-distributor relationship.

Finally, since profit is one of the major goals of any commercial firm, the construct of

performance toward that goal would be relevant to any study dealing with relationship

marketing. Although a term of basic importance such as performance can be defined in many

different ways, Wheelen and Hungar (2000) offer the simple definition that performance is the

end result of activity. However, in a profit-oriented relationship, that activity must be able to

provide value toward the goals of the relationship. Clearly an exporter depends upon the

performance of its distributor for delivering value to its respective market.

The Internet

Few can doubt the impact that the Internet, as a global computer network of

interconnected networks, has had on humankind. In 2002, 531 million people in the world had

access to the Internet (Strauss et al, 2003). This represents approximately 8.5% of the global

population. Of that figure, developed nations, i.e. the nations that conduct most of the worlds

trade, accounted for 88% of all Internet users. The United States claims to have the largest

Internet usage with 182 million users, or 64% of its population. Although these may be

impressive figures, the availability of the Internet is even more prevalent in businesses, because a

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higher proportion of businesses are connected to the Internet than are individual consumers

around the world.

While the reduction of trade barriers has made it easier for companies to conduct

international business, advances in communication technology, such as the Internet, have made it

easier still. By 2008, business-to-business (B2B) sales over the Internet in the U.S. are expected

to reach $1,334B, an approximate 84% increase from what is currently conducted. As for online

retail sales, the amount is expected to reach $230B, a projected 53% increase from 2004. Indeed

few can argue that the Internet has had a tremendous worldwide impact upon business.

The Internet has had immediate and far-reaching effects on International Business. In a

business-to-consumer reference that would apply equally in a business-to-business context,

Quelch and Klein (1996) state that any company that creates its own website could be considered

as a multinational company. Knight and Cavusgil (2004) accurately describe born-global

firms that are internationally oriented from their inception due to their technological expertise.

Saimee (1998b), while offering legitimate caveats and pointing out possible constraints,

acknowledges that the Internet, as a component of export marketing plans, can be used as a

valuable business process tool and can lead to revenue enhancement.

The Internet, in terms of traffic, is doubling approximately every 100 days. While it took

the radio 38 years to diffuse to 50 million users, the telephone 25 years, and the television 13

years, it took the World Wide Web a mere 4 years to reach that level of use (Antonette,

Giunipero, and Sawchuk, 2002). This type of effect has led Dickson (2000) to describe the

Internet as a super innovation, which are distinguished from other technological innovations in

that they increase the speed, efficiency, and effectiveness of the transmission of new ideas and

technologies (Diamond, 1998). In the approximately 15 years of its commercial existence, the

Internet, as a global network of interconnected networks, has transformed how marketing and

business itself is conducted. It has effectively overcome the problems of time and distance and

has created opportunities that did not previously exist. For the exporter, the Internet has

increased access to markets, provided an open 24 hour-a-day forum of communication, and

increased the efficiency of markets by facilitating the relationship between the exporter and its

foreign distributor.

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The Effect of the Internet on the Relationship Between the International Firm and its

Foreign Distributors

According to Mick and Fournier (1998), technology presents many paradoxes for its

users, such as causing both positive and negative feelings. In line with that thinking, Houghton

and Winklhofer (2004) concluded that the Internet has the capability to have both constructive

and destructive influence on channel relationships. Although many believed that the advent of

electronic commerce would lead to drastic changes in the supply chain, those changes have not

been the changes that were anticipated. Instead of the dis-intermediation or the elimination of

the middleman (e.g. Jevons and Gabbott, 2000; Webb, 2002), Narayandas, Caravella, and

Deighton (2002) have found that the buyer-distributor-seller relationship is still important and

has not been supplanted by a direct buyer-seller relationship. In fact, Hamill and Gregory

(1997) state that a Net connection can "substantially improve communications with existing

foreign customers, suppliers, agents and distributors, identify new customers and distributors,

and generate a wealth of information on market trends and on the latest technology and research

and technical developments".

Contrary to what was feared, Boyle (2001) found that the Internet actually causes firms to

become closer with their distributors due to the communication efficiencies provided by such

technology. Among the advantages that firms can gain from the Internet in their relationship

with partners are a global scope and reach, convenience, speed, efficiency and flexibility of

information processing, improved data-base and relationship management, and lower sales and

distribution costs. For the purposes of this study, it is therefore necessary to distinguish between

the use of the Internet as a means of e-commerce transactions that could indeed alienate an

intermediary, and the use of the Internet as a marketing communications tool that would enable

an exporter to communicate more efficiently with its distributor.

Why This Study is Important/Motivation for the Dissertation

Despite widespread recognition of the globalization of the world economy, the ubiquity

of the Internet, and the importance of relationship marketing in the supply chain, relatively little

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research has been conducted in how these three domains affect each other. Fewer studies have

involved empirical testing.

Individually, the beneficial effects of global business, information/communication

technology, and supply chain management are well documented. However, with the growing

competition in the global marketplace, the instrumental role of interfirm relationships and

networks, and the increasing power that Internet technology provides, the interaction of these

three areas in global business is too important and pervasive to be ignored. Therefore, this

dissertation examines the effect that the use of Internet technology has in todays exporter-

distributor relationship. Although Internet technology is actually a continuum ranging from

email to more complex data exchange and video conferencing capabilities, this study focuses on

the extent to which exporters use Internet technology in general.

The remainder of this proposal is composed of the following chapters. Chapter

Two includes a review of relevant literature as it pertains to international business, interfirm

relationships including the exporter-distributor relationship, communication, use of Internet

technology in business, the motivation of distributors, and distributor performance. Also

incorporated into Chapter Two are the studys model and proposed hypothetical relationships

between the constructs of interest: Use of Internet Technology, Quality of Communication,

Quality of Relationship, Distributor Motivation, and Distributor Performance. Chapter Three

will discuss the methodology and data analysis used in this study. Finally, Chapter 4 will discuss

the conclusions and implications of the study.

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CHAPTER 2

LITERATURE REVIEW AND HYPOTHESES


The purpose of this chapter is to present an overview of the research streams under

investigation in this dissertation. The areas of communication, distributor relationships,

motivation, and performance are discussed in the context of the use of Internet technology in

international business, specifically exporting. Hypothesized relationships between these

constructs are then presented, with Internet technology serving an antecedent role.

Foundational Theory in International Business

Original efforts to explain why trade occurs were nation-oriented. These country-based

theories included mercantilism, Adam Smiths Absolute Advantage, David Ricardos

Comparative Advantage, and Hechsher-Ohlins Theory of Relative Factor Endowments.

However, more recent attempts utilize company-based theories that have developed due to the

growing influence of the multinational company on the world economy.

The three traditional models of firm internationalization in the marketing literature are the

Product Cycle Theory (Vernon, 1966), the Uppsala Model (Johanson and Vahlne, 1977), and the

Stages Model (Cavusgil, 1984b; Root, 1987). Each of these models, although instrumental in

explaining the historical development of international business, can be viewed in a new light due

to the influence of Internet technology. Each are briefly explained here and information is then

given as to the direction of international business today.

The product cycle theory (Vernon, 1966) focuses on the product manufactured by the

firm, not its factor proportions, i.e. whether a country is endowed with more labor or capital.

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The product and its method of manufacture experience three stages of maturation as the product

becomes more commercialized: new product, maturing product, and standardized product. As

the product matures, the cost of production decreases, and the technology of production diffuses,

the product changes from being one that is exported by the innovative firm, to one that is

eventually imported from a more efficient source.

The Uppsala Model (Johanson and Vahlne, 1977; Johanson and Mattsson, 1988; Vahlne

and Nordstorm, 1988), proposes that firms will follow a country-by-country sequential process in

entering foreign markets. The Uppsala Model assumes that the firm accumulates international

market knowledge through experience that is acquired over time. A firm following this model

will also depend and benefit from its relationships with other international entities (e.g.

distributors, customers, etc.) with which it interacts. Although a firm that is relatively new to the

export market may start out using local agents and distributors, it eventually will graduate to

more involved and capital-intensive structures over time (e.g. foreign manufacturing or sales

offices).

The Stages Model (Cavusgil, 1984; Root, 1987) takes a more systematic approach in

explaining firm international development. As a firm accumulates more experience, it is

believed to logically progress from a simpler, less involved stage to a more complex stage.

Typical stages in their order of occurrence include exporting via an agent or distributor,

licensing the product in the market, establishing a sales subsidiary in the market, establishing a

joint venture with a local firm, and, ultimately, directly investing in the foreign market by

building a manufacturing facility.

Regardless of the method of internationalization, the need for firms, especially U.S.

firms, to export is understood. As evidenced by such works as Knight and Cavusgil (2004) and

Quelch and Klein (1996), Internet technology has facilitated the internationalization process for

firms and has allowed them to enter the global market sooner than has historically been theorized

by the Uppsala or the Stages models.

Foundational Theory in the Relationship Between the Firm and its

Distributors/Distribution Theory

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In spite of whatever skill or competitive advantage a firm may have, the assistance or

expertise of another firm somewhere within the supply chain is eventually needed. Even the

largest of manufacturers are not totally vertically integrated and often depend on other firms to

complete all the necessary steps in the export process. This involvement by other firms is

especially relevant to US firms in exporting where they face markets and environments that are

quite different from what they face in their domestic markets.

A U.S. firm may participate in indirect exporting where it utilizes the services of

various independent firms or organizations that are located in the U.S. In this instance the

responsibility of selling overseas is assumed by the independent organization. However, in

direct exporting such overseas selling remains the responsibility of the U.S. manufacturer. As

previously mentioned, export sales activities can be conducted overseas by the firm itself within

an integrated channel if it has the resources and expertise. More often, however, such activities

are conducted by independent organizations with which the U.S. manufacturer has established a

professional iterfirm relationship (Anderson and Coughlan, 1987).

From a strategic perspective, this relationship provides critical resources to the U.S.

exporters strategic position (Barney, 1991). However, the manufacturer can chose between a

range of relationships or contracts to organize the export distribution function. Each contract

imposes its own trade-off in terms of control and resource commitment (Anderson and Gatignon,

1986). A dilemma that the exporter faces is therefore that while high performance in the foreign

market is the goal, utilizing an independent firm to achieve this goal results in the loss of

complete control over the marketing process in the market by the exporter.

The uniqueness of the exporter-distributor relationship stems not only from the fact that

they are independent organizations with potential conflicts and located in physically separate

countries, but also the cultural distance that can exist between the two entities as members of

different cultures. Although empirical evidence on the effect of cultural distance on foreign

partnership performance is mixed (e.g. Barkema, Shenkar, Vermeulen and Bell, 1997; Chang,

1995; Johnson, Cullen and Sakano, 1991; Li and Guisinger, 1991; Park and Ungson, 1997), this

study takes the position that a greater cultural distance makes the transaction of cross-border

trade more challenging and complex. Furthermore, the effect that these differences can have on

the exporter-distributor relationship and its performance only underscores the need to study the

influence of Internet technology.

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Ultimately, firms seek to maximize organizational performance. In this dissertation,

numerous constructs will be investigated in terms of their antecedent effect on this critical

variable. As with other studies, performance will be defined in terms of the firms financial

goals.

Foundational Theory in the Use of the Internet

The Internet and its related technologies, as enablers, represent an unprecedented

opportunity for firms to transcend traditional problems encountered with trade. Smaller firms

especially can benefit from the relatively inexpensive and new-found ability to gather

information, promote their business, and service new markets (Quelch and Klein, 1996).

Possible effects that the Internet can have on the marketing environment which will facilitate the

internationalization of firms, lower marketing communication costs, greater price

standardization, reduced information float time, temporal asynchronicity of communication,

increased contact between buyers and sellers, and changes in intermediary relationships

(Fletcher, Bell, and McNaughton, 2004).

Such new information and communication technologies, such as the Internet, create

opportunities and challenges for firms within their relationships, industries, and markets. Indeed,

the ramifications of the Internet go to the very core of a firms existence by affecting massive

organizational restructuring and how firms relate and communicate with their markets. Much of

this effect can be considered through the Transaction Cost Analysis (TCA) of Williamson

(1975), which argues that firms enter into exchanges because of market opportunities. The

coordination of the processes that firms require to provide goods and services can sometimes be

provided more efficiently within a firm than through a market exchange. These transaction

costs are those costs pertaining to search, information gathering, monitoring/enforcing

contracts, and access to resources and processes that are necessary to transform resources into

goods and services. Within the TCA framework, when transaction costs are high, a firm will

consider it too costly to conduct any required process itself and will thus contract the process

through a third party. However, when transaction costs are low, a firm has little incentive to seek

necessary transactions from a business-to-business market exchange and will opt to conduct

them internally.

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Transaction costs can be further broken down into 1) production costs, or 2)

administrative costs. Production costs refer to the costs of processes directly involved in the

production or manufacture of the good, such as the technology required for actual production.

Administrative costs refer to processes that pertain to costs incurred in support of, or ancillary to,

production costs. An example would be the cost of obtaining and processing market

information. The Internet can lower administrative transaction costs in three basic ways: 1)

increasing the amount of information available in a convenient and timely manner as to reduce

search costs; 2) increasing the ability to compare and negotiate prices and to monitor

performance of partners as to reduce contracting costs; and 3) reducing the costs of sharing

information and automating and integrating business processes as to reduce co-ordination costs

(Fletcher, Bell, and McNaughton, 2004). Similar effects were also emphasized by Lanconi,

Smith, and Oliva (2000) when they concluded that the greatest potential of the Internet for

supply chain management (SCM) in general is in 1) improving communication between

customers and their suppliers, 2) improving service levels, and 3) reducing overall logistics costs.

Key Constructs and the Proposed Relationships Among Them

As independent entities, a U.S. exporter and its international distributor bring their own

qualities and expectations to the partnership. Differences in the specific qualities of the partners

and their expectations directly influence both the nature, functioning, and outcome of any

relationship. Key constructs in the partnership between the exporting firm and its international

distributor that are studied in this research include the quality of communications they share, the

quality of the relationship itself, the motivation of the distributor, and the performance of the

distributor. The focus of this research is the effect that Internet technology has on the business

dealings that include these constructs between an exporter and its foreign distributor.

The potential effect of Internet technology on distribution and the whole supply chain has

been investigated (e.g. Lancioni, Smith, and Oliva, 200) and there are numerous applications of

such technology that are available to all members of the supply chain. However, the key to

enhanced operations is not only efficient information transfer, but also timely information

availability. The Internet has provided the opportunity for both demand-side and supply-side

information to be readily available to members of the supply chain (Kehoe and Boughton, 2001).

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Consequently, an exporter and its foreign distributor can exchange information with an

efficiency that was not available under a traditional information system.

Communication between an exporter and its distributor is essential. It provides for the

sending and receiving of information among members of the channel of distribution and between

the channel and its environment (Mohr, Fisher, and Nevin, 1996). Communication between

channel members creates the flow of information that is necessary to support the flow of

products or services to the consumer. Therefore, the exporter must strive to foster an effective

flow of information between the firm and its distributor. Considering that the distributor is in

another country with differences in time, language, culture, goals, etc., the firm will need to

attend to the quality of communication, i.e. speed, frequency, and accuracy.

The relationship between the U.S. exporter and its foreign distributor will determine the

depth and extent of their business interactions and the climate in which they will pursue shared

objectives. Types of interfirm relationships range from arms-length agreements to more

integrated and interdependent arrangements. However, it is not the type of relationship between

an exporter and distributor with which this study is concerned, rather it is the quality of the

relationship. Consequently, this research asserts that any type of business relationship,

regardless of the amount of interdependence, can be described in terms of its relationship

quality.

Due to the growing competitive environment and the importance of interfirm partnerships

that globalization presents, an exporting firm must depend on the performance of their distributor

for success in a foreign market. Since a distributor is an independent organization and has its

own objectives and goals that are separate from that of the U.S. exporter, it does not

automatically react promptly and cooperatively to the exporters needs. Consequently, it is a

responsibility of the U.S. firms management to support and motivate its distributor to perform in

a manner that would achieve desired objectives and goals.

The rationale behind an exporting firms motivation of its distributor is to maximize the

distributors opportunity and willingness to perform those duties that would lead to market

success. Cavusgil and Zou (1994) found that performance of export ventures increased with the

amount of support the distributor received from the exporting firm. The sole reason behind

joining forces with a partner is to enhance firm performance. In fact, all advantages of the

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exporter-distributor relationship should both directly and indirectly translate into enhanced

performance for each partner.

Use of Internet Technology

Although Internet technology is a broad term encompassing a wide range of applications,

such as email, intranet, extranet, webpages, etc., not all organizations use each application.

Some firms may be advanced enough to utilize complex extranets, but others may see a simpler

application, such as email, as being adequate for their needs. Therefore, the adoption of a

specific application will depend on the individual needs, roles, and capabilities of the firm.

However, the common thread that ties all of these applications together is the technology of the

Internet itself. It is the technology of the Internet that makes it the enabler that it is, not one

specific application. Consequently, for the purpose of this research, the term Use of Internet

Technology will refer to the use of any Internet technology by an exporter in the process of

conducting business with its foreign distributor.

Quality of Communication

For the purposes of this study, Quality of Communications is defined as the speed,

frequency, and accuracy of information exchange between a U.S. exporting firm and its foreign

distributor. As previously mentioned, communication between channel members has been

described by Mohr and Nevin (1990) as the glue that holds together a channel of distribution.

As such, communication provides for the sending and receiving of information among channel

members and between the channel and its surrounding environment (Mohr, Fisher, and Nevin,

1996). Regarding the inadequate frequency of communication between channel members, Mohr

and Sohi (1995) found that it could inhibit effective channel communication because it tends to

make members feel out of the loop and may deprive members the necessary information to

achieve market objectives and goals. Consequently, a firm with channel members overseas,

particularly in numerous markets with different languages, social customs, time zones, etc., will

need to assure that the quality of information exchange, i.e. communication, is adequate between

its management and its foreign distributors. This quality of information exchange is a function

of speed, frequency, and accuracy.

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Quality of Relationship

Although several studies have stressed the importance of the quality of relationships in

different settings (e.g. Dwyer, Schurr, and Oh, 1987; Johnson et al., 1993; Kumar, Scheer, and

Steenkamp, 1995), few have agreed upon the dimensions or terms in which the quality of a

relationship should be defined. For the purposes of this dissertation and in order to capture the

overall depth and strength of the exporter-distributor relationship, the construct Quality of

Relationship will be defined as the degree of trust, cooperation, and commitment that exists

between a U.S. exporter and its foreign distributor in their interfirm relationship. Bleeke and

Ernst (1993) state that For most global businesses, the days of flat-out, predatory competition

are over.In place of the predation, many multinational companies are learning that they must

collaborate to compete. That collaboration is similar to the network paradigm espoused by

Thorelli (1986) in which more and more competition in the global marketplace is occurring

between networks of firms. According to Morgan and Hunt (1994), commitment and trust are

key elements of the relationship because they produce outcomes that promote efficiency,

productivity, and effectiveness. Furthermore, commitment and trust lead directly to cooperative

behaviors that are conducive to relationship success.

Distributor Motivation

Motivation has been defined as the set of processes that arouse, direct, and maintain

human behavior toward attaining a goal (Greenberg and Baron, 1993). In the context of an

exporter-distributor relationship, motivation would be any action taken by the manufacturer

(exporter) to foster strong channel member cooperation in implementing the manufacturers

(exporter) distribution objectives (Rosenbloom, 2004). Since distributors, as channel members,

are independent organizations with their own objectives and goals, they do not always respond

automatically to manufacturer needs in a cooperative manner (Heide, 1994). Consequently,

without the proper motivation of channel members by the manufacturer, distributor performance

may be unsatisfactory. Therefore, for the purpose of this research, the concept of Distributor

Motivation is defined as the willingness of the distributor to pursue and conduct activities that

lead to the attainment of distributor objectives and goals.

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Distributor Performance

As pointed out by Katsikeas, Leonidou, and Morgan (2000), export performance is one of

the most widely researched, yet least understood and most controversial, concepts in

international business. Part of this controversy could be attributed to the lack of agreement in

conceptualization, operationalization, and measurement of export performance as a construct and

the taking for granted of its role in international business. Although a widely researched topic,

the export performance literature is very fragmented, making definition and understanding of the

concept difficult (Cavusgil and Zou, 1994, Gunert and Ellegaard, 1993). As a consequence, the

development of reliable and valid measures of export performance is problematic and

inconsistent (Mattyssens and Pauwels, 1996; Walters and Samiee, 1990). Yet, export

performance remains important to both managers (Kumcu, Harcar, and Kumcu, 1995); Samiee

and Walters, 1990) and marketing researchers (Zou and Stan, 1998).

Although a simple definition of export performance would be the outcome of a firms

export marketing activities (Shoham, 1996), this study is concerned with export performance

only at the distributor level. Performance of the distributor is relevant because of its vital role in

the export supply chain and is a major determinant of export market performance. Even though

performance can be measured by economic and non-economic means (Cavusgil and Zou, 1994;

and Matthyssens and Pauwels, 1996), for the purpose of this study Distributor Performance is

defined as the extent to which the distributor achieves its pre-determined objectives and goals

in the export market.

Hypotheses Development

The Internet

Historically, as indicated by the literature (e,g, Johanson and Vahlne, 1990; Cavusgil,

1984; Root, 1987), firms have typically become involved in the international market through

some sort of evolutionary or sequential process. However, there is evidence that firms do not

necessarily use this technique to enter foreign markets (e.g. Millington and Bayliss, 1990;

Turnbull, 1987). As indicated by Knight and Cavusgil (1996, 2004), the use of technology, such

as the Internet, helps firms overcome traditional barriers to conducting international trade such as

time and distance, and allows firms to bypass conventionally recognized stages. This advantage

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permits any firm to obtain instant access to worldwide markets by merely establishing a website

(Quelch and Klein, 1996).

To the extent that a positive relationship exists between Quality of Communication,

Quality of Relationship, Distributor Motivation, and Distributor Performance, it is logical to

investigate this linkage in broader contexts of other variables. The marketing of goods and

services overseas is a complex process tempered with growing competition, increased customer

demands, and the need for greater efficiencies in the supply chain. In this dissertation, I

investigate the likely effect of the Internet on the relationships proposed in Figure 1.

The Internet provides a variety of benefits for an exporting firm in conjunction with its

distributor. Contrary to the popular belief that the Internet will lead to disintermediation of the

supply chain, there is evidence that the Internet can actually improve relationships (Narayandas,

Caravella, and Deighton, 2002; Zank and Vokurka, 2003). Manufacturers and distributors can

benefit from enhanced information availability and savings from improvements in productivity

and a reduction in processing costs (Cohn, Brady, and Welch, 2000; Croom, 2000).

In supply chain management, especially in an international environment, effective

communication and sharing of information is vital to the success of a distributor. According to

seminal works such as Galbraith (1973), Weick (1979), and Lengel and Daft (1984),

organizations process information in order to reduce uncertainty (i.e. the lack of information)

and equivocality (i.e. ambiguity). These two qualities can influence the information processing

that is required for adequate organization performance. Uncertainty can be reduced by obtaining

more information from any communication medium. However information and issues can be

fuzzy and have several interpretations, especially when a firm is dealing with a foreign

organization, as with an export distributor. This is what causes equivocality

According to Weick (1979), managers reduce ambiguity by cooperatively defining and

creating an answer, rather than learning the answer by collecting more data. Daft and and

Lengel (1984) asserted that face-to-face media were better for equivocal or ambiguous message,

while written media could be used for unequivocal messages. Therefore the type of message can

influence the choice of medium that is used.

Due to differences in such things as culture, language, law, and simple time and distance,

many issues, ideas, and intentions in international business can be ill-defined and open to

different interpretations. According to Dwyer, Schurr, and Oh (1987), a major aspect of

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information technology investments is the facilitation of frequency of contact and greater

information sharing, which are crucial aspects of better interfirm relationships. Sriram and

Stump (2003) found that information technology investments can indeed foster collaborative

communication by positively affecting the frequency of communication between partners.

However, not only the speed and frequency of communication is important, but also the

accuracy of information. This accuracy can be facilitated by the richness of the information

that is carried by the medium. Daft and Lengel (1986) define media richness as the ability of

information to change understanding within a time interval. These rich communications can,

in a timely manner, overcome different frames of reference and clarify ambiguous issues that can

affect mutual understanding. According to Daft and Wignton (1979), differences in richness are

based on the mediums capacity for immediate feedback, the number of cues and channels

utilized, personalization, and the variety of language, all of which could allow managers to

converge on a common interpretation.

Media vary in the capacity to process rich information (Daft and Lengel, 1984). Based

on a decreasing level of richness, media classifications are 1) face-to-face, 2) telephone, 3)

personal written documents, 4) impersonal written documents, and 5) numeric documents. In

equivocal situations, face-to-face techniques would be preferable (Daft and Macintosh, 1981).

Vickery et al (2004), in their study of the richness of certain media utilized in a business-to-

business context, including electronic media such as e-mail, found that media richness can have

both a direct effect on the initiation, development, and maintenance of the interdependent

relationship and through it, an indirect effect on performance indicators such as satisfaction and

loyalty. This is of particular relevance to the export-distributor relationship, since it is one of

organizational interdependence and exists in a complex environment.

A face-to-face meeting with a foreign distributor is not always possible for an American

exporter. Although other forms of communication provide similar benefits as the Internet, such

as speed and frequency, the Internet provides a certain media effect involving a combination of

richness, convenience, and synchronicity that other methods do not. According to the

characteristics presented by Vickery et al. (2004), electronic media, such as email, can provide

fast feedback, a limited visual channel, personal messaging, both natural and numeric language,

and a high/moderate level of information richness. However, when certain Internet capabilities

such as teleconferencing and web cams are added, these ratings can increase. Plus other studies

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have noted that Internet technologies reduce the cost of communication and information

coordination and promote better communication between organizations (Hoffman and Novak,

1996; Lewis and Talalayevsky, 1997). These capabilities lead to the first hypothesis.

H1: In the relationship between the exporting firm and its foreign distributors, Use of

Internet Technology is positively associated with the Quality of Communication.

Distributors perform a variety of services for exporters, including increasing sales,

customer contact and service, and market feedback. The environment in which these foreign

distributors perform these functions is increasingly dynamic and turbulent, making effective

performance increasingly difficult. Sources of this environmental turbulence include numerous

cultural, political, and economic differences (Czinkota et al., 2001). Plus, distributors are

independent firms and can have loyalties to other manufacturers. Consequently, an ongoing task

of any exporting firm is to motivate their foreign distributor to do what is necessary to achieve

the exporters established objectives and goals.

The motivation of international distributors is accomplished with the same basic

approach as that of domestic distributors. However, there are significant differences in the

international environment which can make it more challenging. McVey (1960) notes that the

distributor does not consider itself as a hired hand, but as a representative of its own customers

and the complete product line it may carry. Without proper incentive, the distributor will not

treat one product any differently than another. Consequently, it is important for an exporter to

communicate often and effectively with its distributor.

Various authors have stated that firms must learn what their distributors want out of the

channel relationship (Eyuboglu, 1993; Rosenbloom, 1999) in order to provide them with

motivation. As reported in Quelch and Klein (1996), the Internet helps to overcome barriers to

communication between firms, employees, and customers by removing impediments created by

differences in geography, times zones, and location. This results in a frictionless business

environment in which firms can interact. By providing such a frictionless interaction, the

Internet, with its richness and asynchronous capability, can facilitate the exchange of more

information and knowledge, which will allow the exporter to better ascertain the needs and

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problems of the distributor, offer support that is consistent with those needs, and provide more

motivation in the form of clearer expectations and goals.

H2:In the relationship between the exporting firm and its foreign distributor, Quality of

Communications is positively associated withDistributor Motivation.

The exchange of information plays a central role in this studys definition of Quality of

Communication. The concept of information exchange is defined by Narus and Anderson (1990)

as the formal and informal sharing of meaningful and timely information between firms in the

context of inter-organizational partnerships. Both Morgan and Hunt (1994) and Moorman,

Deshpande, and Zaltman (1993) believe that the exchange of timely information can lead to

increased trust since communication facilitates dispute resolution and assists in the sharing of

perceptions and coordination of expectations. Anderson and Narus (1984, 1990) believe that

meaningful communication is a requirement for trust between firms in a partnership. Coughlan

et al. (2001) reinforce this belief by concluding that trust can be generated within marketing

channels through increased communication. Furthermore, this building of trust can, in turn, lead

to better communication, which would further reinforce trust (Anderson and Narus, 1984, 1990).

Once firms establish trust through improved communication, they can coordinate efforts in order

to achieve outcomes that would not be possible if each firm acted individually in its own interest.

Heide & John (1992) state that when firms believe they will receive all information on a

continuing basis from their partner, it will assist in dealing with changes in internal and external

environmental conditions. It has been determined that the frequency and quality of information

exchange can be a significant determinant of the extent to which parties in a partnership

understand each others goals and coordinate efforts to achieve mutual goals (Grabner and

Rosenberg, 1969; Guiltinan, Rejab, and Rodgers, 1980). This coordination of efforts leads to

stronger working relationships.

In a study of electronic data interchange (EDI), Marcussen (1996) points out that

technologies such as EDI can, on one hand, appear to be impersonal and actually weaken

relationships. On the other hand, however, he points out that the increased speed and accuracy

of information exchange should strengthen relationships. Indeed, Larson and Kulchitsky (2000),

in another study of EDI, found that closer buyer-supplier relationships can result from higher

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quality of information. Sriram and Stump (2003) found that the quality of relationship with

suppliers is positively affected by the frequency of communication resulting from investments in

information technology. This same communication quality can positively affect the relationship

between an exporter and its foreign distributor.

NOTE: In this dissertations original proposal, three dimensions of Quality of

Relationship, i.e. Trust, Cooperation, and Commitment, were addressed collectively. However,

upon further analysis it was determined to treat them as individual constructs. This decision is

supported by the literature. These changes are reflected in the following hypotheses.

H3a: In the relationship between the exporting firm and its foreign distributors, Quality

of Communications is positively associated with Trust.

H3b:In the relationship between the exporting firm and its foreign distributors, Quality

of Communications is positively associated with Cooperation.

H3c:In the relationship between the exporting firm and its foreign distributors, Quality

of Communications is positively associated with Commitment.

Communication is but one aspect of a channel relationship. In their study regarding

communication, Anderson, Lodish, and Weitz (1987) found that through participation in mutual

goal setting (i.e. an inter-organizational relationship) channel members internalize goals for

performance. As a consequence, they are more strongly motivated to achieve those goals.

However, this participation is a direct result of the working relationship the two parties share. In

his case study on how a firm stimulates distributor sales, Weber (2000) found that through

partnering the firm was able to design attractive incentives for the distributor that resulted in a

competitive advantage for the firm.

Although communication can facilitate motivation, Shipley and Jobber (1991) point out

that there is no guarantee that distributors will respond to such motivators. Rather, it is the

nature of the relationship between the exporter and distributor that contributes to the motivation

of the distributor. In fact, according to Siquaw, Simpson, and Baker (1998), the channel

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relationship can be considered as a reference group from which a distributor feels compelled to

conform to norms established by the supplier.

As determined by Boyle (2001), use of Internet technology tends to enhance commitment

between supply chain partners and can, therefore, draw them closer together. The more trust,

commitment, and cooperation two firms share, the more they will realize that their coordinated

efforts will achieve greater outcomes than what each member would achieve independently

(Anderson and Narus, 1990). Stern and El-Ansary (1992) state that such inter-firm cooperation

is a central theme in channels of distribution theory. Etgar (1979) believed that timely

communication promotes trust by assisting in the resolution of disputes in the relationship and

aligning perceptions and expectations. This willingness and ability to resolve disputes and align

perceptions and expectations is what an exporter needs to determine the needs and wants of a

distributor that will result in its motivation.





H4a:In the relationship between the exporting firm and its foreign distributors, Trust is

positively associated withDistributor Motivation.

H4b: In the relationship between the exporting firm and its foreign distributors,

Cooperation is positively associated withDistributor Motivation.

H4c: In the relationship between the exporting firm and its foreign distributors,

Commitment is positively associated withDistributor Motivation.

Scholars theorize that the quality of communications between the firm and its

international distributor can strongly influence the overall performance of the distributor in

foreign markets (Cavusgil, 1983; Madsen, 1989; Amine and Cavusgil, 1986; Kirpalani and

MacIntosh, 1980). It is logical that an interdependent firm, such as a distributor, would be able

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to perform its duties more effectively if it had a better understanding of what were the exporters

goals in that particular market and what the exporter expected from the distributor.

Larson and Kulchitsky (2000) found that information quality has a direct and favorable

impact on performance. Although they included it as a dimension of relationship, Rosson and

Ford (1982) found that communication intensity between an exporter and its overseas distributor

was positively correlated with export performance. Furthermore, Anderson and Narus (1984,

1990) determined that the positive correlation between outcomes and communication was

actually reciprocal, i.e. communication facilitates beneficial outcomes between a manufacturer

and its overseas distributor, while such outcomes in turn facilitate further communication.

As part of the glue that holds a channel of distribution together, effective

communication allows for the exchange of information between partners in an interfirm

organization. Inadequate communication can cause a member to feel left out (Mohr, Fisher,

and Nevin, 1996) and inhibit the information needed to achieve market objectives and goals.

Salcedo and Grackin (2000) point out how information sharing and management (i.e.

communication) can lead to enhanced performance in partners. According to Srinivasan, Kekre,

and Mukhopadhyay (1994), performance gains from such innovations as just-in-time delivery

depend on real-time sharing of accurate information between the buyer and supplier.

According to Simchi-Levy et al., (2000), the ability to share information via Internet

technology allows supply chain partners to enhance customer value by allowing them to

sense and respond to customer needs instead of simply selling what is produced. Furthermore,

Vickery et al., (2004) found that media richness has a direct effect on B2B customer loyalty,

which has been linked to such performance measures as increased market share and revenue (e.g.

Blattberg, et al. 2001; Reichheld 1993). In essence, a foreign distributor could be considered as a

B2B customer of the exporter, whose loyalty can affect performance. Based on this reasoning,

this study proposes the following:

H5: In the relationship between the exporting firm and its foreign distributors, Quality

of Communications is positively associated withDistributor Performance.

All definitions of the concept of motivation include some sort of outcome-related or

goal-directed activity (e.g. Greenberg and Baron, 1993; Mitchell, 1982; Robbins, 1993;

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Rosenbloom, 2004). In a business relationship setting, the goal is usually increased or improved

performance in order to increase profitability. However, performance in the supply chain,

particularly distribution, has traditionally been acknowledged as a weak link in the overall

marketing chain which can add to overall costs (Weber, 2000). Lassar and Kerr (1996)

acknowledge that a manufacturers attempts to achieve its goals could suffer if a distributor fails

to exert sufficient effort on the manufacturers behalf, thus emphasizing the relation between

the level of motivation and the outcome of performance (Ramlall, 2004).

Shipley and Jobber (1991) further acknowledge this relation of motivation to

performance (Walker et al, 1979) in their call for more motivation of salespeople. In fact,

Mehta, Dubinsky, & Anderson (2003), state that higher channel partner motivation is directly

associated with higher performance.

It is almost intuitive that the more a worker is motivated, the more they will perform.

According to expectancy theory (Vroom, 1964), an employees performance level is a product of

his/her motivation based on the belief that such performance will result in a good performance

appraisal and, consequently, a reward. Such rewards, whether money-oriented or not, are

intended to satisfy the employees needs or goals. The key to such an approach is understanding

a) the individuals goals and b) the linkage between the goals, the effort exerted to achieve them,

and the satisfaction received from the resultant reward. Simply because an exporter may

understand the needs his/her distributor is seeking to satisfy does not guarantee that the

distributor will perceive high performance as a means to achieve the satisfaction of those needs.

In such a situation, the added richness of Internet technology will allow the exporter to both

better ascertain the needs and problems of the distributor (Rosenbloom, 1999), whereby

determining how best to motivate them, and convey the requisite expectations and rewards to the

distributor.

However, what motivates a person is highly cultural specific. The U.S. emphasizes

individualism, while other cultures emphasize what is good for the group, or collectivisim

(Hofstede, 1984). Therefore a U.S. exporter must accurately determine the foundation of its

distributors needs and goals, plus how it can best satisfy those needs and goals. Again, the

richness of Internet technology will facilitate such a task and, consequently, positively affect the

distributors performance.

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H6: In the relationship between the exporting firm and its foreign distributors,

Distributor Motivation is positively associated withDistributor Performance.

When firms, such as an exporter and its distributor, decide upon a strategic relationship,

the firms decide to proactively combine their resources in order to expand their joint capabilities,

thereby enhancing their competitive advantage (Borys and Jemison, 1989). The nature of the

relationship becomes key. A stronger relationship will lead to higher levels of performance. The

literature has indicated that close interfirm relationships exhibiting such characteristics as trust

and commitment offer various benefits to participants (Gundlach, Achrol, and Mentzer, 1995;

Morgan and Hunt, 1994). A positive association between trust in a relationship and performance

has been supported in different contexts (Crosby, Evans, and Cowles,1990; Robicheaux and

Coleman, 1994). The works of Madhok (1995) and Parkhe (1993a) have even extended this

finding to cross-border relationships.

Using the work of Morgan and Hunt (1994) to establish that cooperative relationships

depend on considerable commitment and trust and drawing from the work of Anderson and

Narus (1990) to note that cooperative relationships can enhance a firms competitiveness, Weber

(2000) found that improvement in distribution performance results when a firm teams with its

distributor. Zaheerm NcEvily, and Perrone (1998) found a strong link between

interorganizational trust, while Larson and Kulchitsky (2000) proved that closer buyer-supplier

relationships lead to improved performance. In addition, Rosson and Ford (1982) established

that the most successful exporter-distributor dyads were those in which the parties adapted their

roles and routines and displayed a commitment to jointly developing business in a chosen

market.

According to Johnston and Vitale (1988), companies use information technology for

competitive advantage in systems that tie their firm to members of the supply chain. These

organizations use the electronic link between them to significantly change their relationship.

They have found that the increased familiarity provided by their joint systems serves as a means

to collaborate on a wide range of initiatives that can improve the performance of each partner.

Although Aulakh, Kotabe, and Sahay (1996) did not find statistical support that trust is

positively related to a partnerships market performance, this merely suggests that trust may not

have a unique contribution in explaining the variance in partnership performance, but could

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possibly contribute to the overall affect of the relationship on performance. According to Wen,

Yen, and Lin (1998), it is not the technology itself that helps improve performance, but the

enhancing effect that information technology has on interfirm relationships that is the cause.

This supports the view of Mohr and Nevin (1990) that quantitative channel outcomes, such as

performance, are preceded by qualitative outcomes, such as the quality of relationship. This was

confirmed by Sriram and Stump (2004) when they found that relationship quality, as enhanced

by information technology, can positively affect performance.





H7a:In the relationship between the exporting firm and its foreign distributors, Trust is

positively associated withDistributor Performance.

H7b: In the relationship between the exporting firm and its foreign distributors,

Cooperation is positively associated withDistributor Performance.

H7c: In the relationship between the exporting firm and its foreign distributors,

Commitment is positively associated withDistributor Performance.

Summary

The primary research questions that are addressed in this dissertation are 1) How does

Internet Technology affect communication between a U.S exporter and its foreign distributor,

and 2) how does that quality of communication affect antecedents to distributor performance

such as quality of relationship and distributor motivation. A total of thirteen hypotheses are

proposed in this chapter to address questions. A theoretical model of the hypothesized

relationships was reviewed also. The next chapter addresses the research design of the study,

data collection procedures, analysis plan, and the statistical results of the study. I describe how I

intend to test these hypotheses in an empirical study of international firms.

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CHAPTER 3

RESEARCH METHODOLOGY


This chapter addresses all major aspects of the research design and data analysis. These

aspects are discussed in three stages. First, the sampling approach and descriptive information

about the research design are discussed. Second, questionnaire construction, measures, and

validation of the measurement scales are reviewed. Third, results are presented for the tests of

the studys hypotheses for the proposed model of the effect of Internet technology on the

relationship between an exporter and its overseas distributor.

Research Context

A field study was conducted to test the hypothesized relationships. A field study refers to

a non-experimental scientific inquiry aimed at hypothesis testing in real social structures

(Kerlinger and Lee 2000). The specific context for the dissertation involves a cross-sectional

survey within small medium sized U.S. exporters. This context is desirable as it allows for the

examination of Internet technology use in various contexts, while offering a relatively

homogenous sample from a single industry sector.

The phenomenon of interest in this dissertation (i.e., the exporter-distributor relationship)

suggests the appropriateness of a survey-based data collection as part of a field study. Surveys

provide an effective means of studying naturally occurring phenomenon and interrelationships

among multiple variables. Further, many of the constructs of interest in this dissertation have no

means of direct assessment beyond self-reports on a questionnaire. Therefore, many of these

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variables (e.g., quality of communication and quality of relationship) are not readily subject to

manipulation in a laboratory setting.

A field study offers several other advantages for the testing of hypotheses (Kerlinger and

Lee 2000). First, field studies are strong in realism and the generalizability of research results.

Second, the variance of many variables in field settings is large, particularly when compared to

the variance of variables in a laboratory setting. This is of significant relevance due to the

typically small relationships between psychological constructs and performance variables.

Third, field studies provide a greater range of variables due to their natural settings. This allows

for an improved theoretical understanding of the range of Internet technology and an enhanced

managerial understanding of the factors that contribute to the exporter-distributor relationship.

Finally, a field study allows for the determination of the actual strength of relationships among

the various constructs in a real setting.

Several steps have been taken to limit the weaknesses associated with survey-based field

studies (e.g., limited causal inference, control of extraneous variance, and time requirements)

(cf., Kerlinger and Lee 2000). First, a single industry setting (i.e. exporting) for the study was

chosen to limit time and cost constraints. The targeting of export management also permits for

access to a knowledgeable and motivated sample. With this support, a high response rate was

expected. This is particularly relevant given that the focus of analysis is on the relationship

between an exporting company and its overseas distributor. A single research context also helps

to control for certain extraneous sources of variance (Kerlinger and Lee 2000). Using a single

research context helps to eliminate potential extraneous variables that may differ acro

effect of internet technology in the exporter-distributor relationship

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