DEPARTAMENT D’ECONOMIA DE L’EMPRESA

DOCTORAL PROGRAMME

“CREATION, STRATEGY AND MANAGEMENT OF THE FIRM”

RELATIONSHIP IN FOREIGN DISTRIBUTION CHANNELS: HOW TRUST AND COMMITMENT

INFLUENCE INTERNATIONAL PARTNERS

Supervisor: Dr. Alex Rialp Criado

Phd. Student: Diana Trogmaer

Barcelona, 2010

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ABSTRACT

The aim of this work is to investigate empirically if trust and commitment are indeed

essential variables for the success of inter-firm relationships in the international

distribution system as stated by Morgan and Hunt (1994). That is why the focus is on

the nature of relationships in the international market and we propose a conceptual

framework that includes a model based on the relationship of commitment and trust;

followed by individual case analysis and cross-case analysis of four Spanish companies.

These relationships have different particularities considering the country of export or

the time established relations.

Key words: trust, commitment, foreign distribution, relationship marketing,

international market.

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ACKNOWLEDGEMENTS

I have been working on this research project for more than an year and I have

to say that it was a pretty hard process. I did my best to successfully complete

the assignment, although sometimes I think there is always something to

improve or to change. However, the completion of this study would not have

been possible without the aid of various other people. Hence, I would like to

express my sincere gratitude to all of them.

First of all, I would like to thoroughly thank Professor Dr. Alex Rialp, who

accepted to be the supervisor of my research project and provided me with

invaluable advice, helping me to take this task to an end. I am really grateful for

the patience and kindness he showed me during the completion of my project.

I am grateful to Professor Joaquin Verges for providing me the opportunity to

explore the world of academic research, and for his unconditional support.

Next, I would like to thank the four interviewees, for dedicating part of their time

and patience to this research, and also for their offer and interest to participate

in future investigations. Without their kind help the completion of this paper

would not have been possible.

Finally, I am really grateful to my family and friends for offering moral support

during this process.

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Table of contents 1 Problem statement……………………………………………………...…........5 2 Literature review……....…...………………………………………………......7 2.1 Internationalization and the Uppsala Internationalization Model – U model..….9 2.2 Distribution in the international context, transaction cost approach

and agency theory...............................................................................................12 2.3 The nature of Relationship Marketing in the international context....................16 2.4 The Commitment-Trust Theory of Relationship marketing ……………..........21

3 Adopted conceptual framework………………..………….……....………...26 3.1 Antecedents of relationship commitment and trust ……...……………………29 3.2 Outcomes of Relationship Commitment and Trust ………...…………………30 3.3 Foreign market characteristics ……....…………………………………...……32 3.4 Propositions .........……………………………………………………...…..…..34 4. Methodology….……………………………………………………......….......34 4.1 Methods of data collection and sources of information .....................................35 4.2 Case selection and measures................................................................................37 5. Results and discussion.......................................................................................39

Case Indo............................................................................................................40

Case Carpyen.......................................................................................................43 Case House Diet..................................................................................................47 Case Kiluva..........................................................................................................51 5.1 Cross-case analysis..............................................................................................54 6. Conclusion, implications, limitations and further research .........................63

Bibliography……………………………………………………………….…...66 Annex 1...............................................................................................................77

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1. Problem statement

“However competitive a particular industry may be, it always rests on a foundation of shared

interests and mutually agreed-upon rules of conduct, and the competition takes place not in a

jungle but in a society that it presumably both serves and depends upon. Business life, unlike life

in the mythological jungle, is first of all fundamentally cooperative. It is only with the bounds of

mutually shared concerns that competition is possible. And quite the contrary to the "everyone

for himself metaphor, business almost always involves large cooperative and mutually trusting

groups, not only corporations themselves but networks of suppliers, service people, customers,

and investors” (Solomon, 1992, p. 26).

Businesses increasingly are entering into partnerships with foreign companies as global markets

become more attractive and domestic markets remain stagnant. Emerging markets are growing

faster than post-industrial economies and offer more lucrative opportunities (Keitt, 1990).

One of the consequences of globalization has been the growing incidence of collaborative

ventures among companies from different countries. Small, medium and large companies are

choosing partnership as a way to compete in the global marketplace (Cavusgil, 1997). The

motives for international collaboration vary: including a desire to leverage resources and assets,

retain flexibility, reduce risk, gain speed and capitalize on each partner’s strength. A company

can be competitive not only if it depends on its internal strategic assets, but also on the type of

relations that are established with other companies and keeping these types of relations, because

it gets more difficult to defend a competitive position in the businesses based on a dominant

individual capacity.

In the international marketing context, relationships transcend national boundaries and key

players in a given channel may be located anywhere in the world. Increased emphasis on

globalization, cooperative strategies, and strategic alliances, combined with the intensification of

competition on a global scale, has led a growing number of firms to change their distribution

strategies and to emphasize and seek to create greater mutual interdependence (Narus and

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Anderson, 1996; Johnston, Lewin and Spekman, 1999). As a result, channel relationships play an

increasingly central role in the marketing strategies of many firms in both domestic and

international markets (Johnston, Lewin and Spekman, 1999). Unlike relationships in domestic

markets, those formed across national boundaries are affected to a much higher degree by

diverse social, cultural, and other environmental factors which, in turn, can significantly modify

the role and scope of relationships from one country or region to the next.

Most medium size and small companies will expand overseas by engaging in partnership with

distributors or agents in individual markets. Firms of this size have the interest and desire to

market their products and services overseas, but their resources are too limited to permit other

forms of international expansion. In distributor partnership, a foreign independent merchant

purchases goods from an exporter on its own account and resells them to buyers in the local

market. In other words, two or more firms negotiate a temporal, contractual agreement whereby

the overseas distributor will sell and/or serve a domestic firm’s product (Keitt, 1990).

The past decade has witnessed a major directional change in both marketing theory and practice,

seen as a turn towards relationship marketing. Many researchers have focused on relationship

marketing (Dyer, Schurr and Oh, 1987), working partnership (Anderson and Narus, 1990), and

relationalism in export distribution channels (Bello, Chelariu and Zhang, 2003). Relationship

marketing is part of developing “network paradigm”, which recognizes that global competition

occurs increasingly between networks of firms. Achrol (1991) forecasted the rise of “true

marketing companies” within networks of functionally specialized organizations whose

interrelationships, being driven, are “held together and coordinated by market driven focal

organizations” by means of “norms of sharing and commitment based on trust”. To be an

effective competitor in the global economy requires one to be a trusted co-operator in some

network (Morgan and Hunt, 1994).

International marketing has received a lot of attention lately, as well as the influence that trust

and commitment have on the relationship between firms and their foreign distributors (Morgan

and Hunt, 1994; Bello and Gilliland, 1997; Solberg and Nes, 2002; Bello, Chelariu and Zhang,

2003). But most of the research consists on studying the influence of various variables on trust

and commitment or on the influence on trust and commitment on the relationship between firms

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and their foreign distributors. Starting from the same point, the objective of this investigation is

the relationship in the international distribution channels (relationship between manufacturers

and foreign distributors firms) and how this relationship is influenced by two main important

variables: trust and commitment.

This study will focus on the nature of relationship in the international market and on two key

characteristics: trust and commitment, known to be associated with the effective cooperation that

is most important for relationship marketing success. The study starts with a literature review

which includes: internationalization and the Uppsala internationalization model; transaction cost

approach; the nature of relationship marketing; the commitment-trust theory and the key

mediating variable (KMV) model; continues with an adopted conceptual framework that

includes a model based on relationship commitment and trust; followed by case selection,

individual case analysis and cross-case analysis, and finishes with some conclusions and

limitations of the study.

2. Literature review

Growing liberalization, integration and competition in world economies since the post-war

period have been responsible for the increasing engagement of firms in exporting activities

(Douglas and Craig, 1995), because export plays a vital role in world economic affairs and its

importance is expected to grow further as markets become more globalized.

Export development has been highly regarded by both public and corporate policy-makers, due

mainly to the substantial macroeconomic and microeconomic benefits derived from external

trade. From a macroeconomic perspective, exporting can enable national economies to enrich

their foreign exchange reserves, provide employment, create backward and forward linkages,

and, ultimately, lead to a higher standard of living (Czinkota, Rivoli and Ronkainen, 1992). In

microeconomic terms, exporting can give individual firms a competitive advantage, improve

their financial position, increase capacity utilization, and raise technological standards (Terpstra

and Sarathy, 1994).

The exporting phase of the firm's internationalization process is defined as the transfer of goods

or services across national boundaries using indirect or direct methods (Young, Hamill, Wheeler,

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and Davies, 1989). Export operations constitute most usually the first step in this process, and

this stage is critical to the firm's advancement to other forms of international business, such as

licensing, joint ownership or wholly owned production abroad. Exporting is also considered the

most common foreign market entry mode, particularly among small-to-medium-sized enterprises

(SMEs), due to the minimal business risks, low resource commitment and high flexibility of

action it offers (Young et al., 1989).

The interest in the impact of buyer-seller relationships in business markets has increased over the

past decade. The interest reflects the importance of distribution in the value chain and the

relevance of social networks and personal relationships for many conductive exchange

transactions (Dwyer, Schurr and Oh, 1987).

In the real world, the conditions for frictionless pure market mechanisms often do no exist, and

many marketing transactions have important relational dimensions and cannot be classified as

purely market driven “discrete” events. This is particularly the case when evaluating marketing

activity in international distribution channels, where many exchange events accepted between

channel members are often best evaluated as one of a sequence of transactions, with each being

accepted in a context where history and future expectations are key factors (Johnston, Lewin and

Spekman, 1999). But the past decade has witnessed the inception of a major directional change

in both marketing theory and practice. Considered by Webster (1991) to represent a

“fundamental reshaping of the field”, the turn is toward relationship marketing, a concept that

encompasses relational marketing (Dwyer, Schurr, and Oh, 1987), working partnerships

(Anderson and Narus, 1990), strategic alliances and co-marketing alliances.

In the same way Achrol (1991, p. 78, 89) forecasts the rise of ‘true marketing companies” within

networks of functionally specialized organizations whose interrelationships, being driven, are

“held together and coordinated by market driven focal organizations” by means of “norms of

sharing and commitment based on trust”.

In this section we explore the nature of internationalization and Uppsala model, how transaction

cost approach can be applied to distribution context and also the nature of relationship marketing

in the international context.

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2.1. Internationalization and the Uppsala Internationalization Model – U model

“Internationalization is the process by which firms both increase their awareness of the direct

and indirect influence of international transactions on their future, and establish and conduct

transactions with other countries” (Beamish, 1990, p. 77).

In the Uppsala model, the internationalization of the firm is seen as a process in which the

enterprise gradually increases its international involvement (Johanson and Vahlne, 1977, 1990,

2003). This process evolves in interplay between the development of knowledge about foreign

markets and operations on one hand and an increasing commitment of resources to foreign

markets on the other.

The internationalization process model can explain two patterns in the internationalization of the

firm. One is that the firm’s engagement in the specific country market develops according to an

establishment chain, i.e. at the start no regular export activities are performed in the market, then

export takes place via independent representatives, later through a sales subsidiary, and

eventually manufacturing may follow. The second pattern explained is that firms enter new

markets with successively greater psychic distance. Psychic distance is defined in terms of

factors such as differences in language, culture, political systems, etc., which disturb the flow of

information between the firm and the market (Johanson and Wiedersheim-Paul, 1975).

The process is a theoretical model based on assumptions about the relations between the

concepts of market commitment, market knowledge, current business activities and commitment

decisions. The patterns can be seen as operationalizations of the process model with the stages

and the psychic distance as possible indicators (Andersen, 1993).

Johanson and Wiedersheim-Paul (1975) distinguished between four different stages of entering

an international market, where the successive stages represent higher degrees of international

involvement:

Stage 1: No regular export activities.

Stage 2: Export via independent representatives (agents).

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Stage 3: Establishment of an overseas sales subsidiary.

Stage 4: Overseas production/manufacturing units.

These steps suggest that internationalization is a process of organizational learning characterized

by the increasing degree of involvement of firms in specific foreign markets. Firms increase their

presence in a foreign market by moving from Stage 1 through Stages 2 and 3 to Stage 4, by

accumulating market-specific knowledge. This type of knowledge is experiential and refers to

knowledge of the culture, customers, business and market structure, and so forth to individual

markets. In this way, prior experience of operating in a particular foreign market is essential in

some way to the process of accumulating relevant market specific knowledge. In the same way,

Johanson and Vahlne (1990, p. 2) said:

“a critical assumption is that market knowledge, including perceptions of market opportunities

and problems, is acquired primarily through experience from current business activities in the

market. This market experience is to a large extent country-specific and it can be generalized to

other country markets only with difficulty”.

The process model has grown out of empirical research, based on traditional microeconomic and

marketing theory, about Swedish firms competing internationally (Carlson, 1975). It might be

expected that the model validity is limited to countries like Sweden which are rather small and

very industrialized, but later research from other countries have supported the model (Bilkey,

1978; Cavusgil, 1984). The model has gained strong support in studies of a wide spectrum of

countries and situations. The empirical research confirms that commitment and experience are

the factors explaining international business behaviour (Johanson and Vahlne, 2003).

Johanson and Wiedersheim-Paul’s (1975) work was further continued and developed by

Johanson and Vahlne (1977, 1990). In order to explain the incremental character of

internationalization, Johanson and Vahlne (1977) formulated a model in which the outcome of

one cycle of events constitutes the input to the next.

The main structure is given by the distinction between state and change aspects of

internationalization variables. The state aspects are the market commitment and market

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knowledge about foreign markets and operations, when the change aspects are decisions to

commit resources and performance of current business activities, a mechanism shown in figure 1

(Johanson and Vahlne, 1990). A basic assumption is that market knowledge and market

commitment affect both commitment decision and the way current decisions are performed, and

these two in turn are affecting market knowledge and commitment.

As Johanson and Vahlne (1990) have explained, in figure 1 the additional market commitment

will be made in small incremental steps. But there are three exceptions: first, firms that have

large resources experience small consequences of their commitment and can take larger

internationalization steps; second, when market conditions are stable and homogenous, relevant

market knowledge can be gained in ways other than experience; and third, when the firm has

considerable experience from markets with similar conditions, it may be able to generalize this

experience to any specific market.

State aspects Change aspects

Figure 1. The Internationalization Process Model (source: Johanson and Vahlne, 1977;1990)

Concerning the U-model, Johanson and Vahlne (1990, p. 17) state that the “aim is...to contribute

to an understanding of the incremental nature of the internationalization process.” Andersen

(1993) affirms that no initial conditions are presented and the model does not explain why or

how the process starts. Also the sequence of conditions is not discussed and Johanson and

Valhne (1990, p. 12) do not take into consideration factors that might influence the process as

Market knowledge

Market commitment

Current activities

Commitment decisions

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they affirm “the internationalization process, once it has started, will tend to proceed regardless

of whatever strategic decisions in that direction are made or not.”

In a more recent work, Johanson and Vahlne (2003) recognize that the learning about the foreign

markets and operations is critical in the internationalization of the firm, and also the need to add

another important factor to the internationalization model. The firms operate in a close business

relationship with the customers, suppliers and other business partners, relationship that creates

the network of interconnected business relationships. Johanson and Vahlne (2003) describe the

model as:

“…firms learning in relationships, which enables them to enter new country market in which

they can develop new relationships which give them a platform for entering other country

markets.”

2.2 From transaction cost approach and agency theory to distribution in the international

context

For an exporting firm to select among foreign modes of entry is one of the most challenging

decisions to make along the internationalization process (Root, 1994). At the beginning of this

process, actually in the early stage of the export development there is the possibility to

internalize this activity inside the firm or not. In this case, choosing a distribution channel abroad

and also the optimal level of integration represents one of the most difficult decisions which the

exporting firm has to take. This decision influences the impact of the firm in the channel of

distribution as well as its success in exporting.

Talking about export, once a domestic manufacturer decides to introduce a product to a foreign

market, a difficult question must be solved. Should the new product be distributed via a

company-owned distribution channel, or it is more efficient to contract distribution to an

independent organization? Anderson and Coughlan (1987) believe that for an economist, this is a

question of vertical integration, in which the choice is between primarily captive agents

(company sales force and company distribution division) or primarily independent intermediaries

(outside sales agents and distributors). The former solution is an integrated channel, which

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generally affords the manufacturer more control than the latter, which is a non-integrated channel

(Anderson and Coughlan, 1987).

A possible explanation is the Transaction Cost Approach (TCA), developed by Williamson

(1975, 1979), which has also extended its analysis to the internationalization issue. This theory

states that firms act trying to minimize the sum of their production and transaction costs. In this

sense, firms should internalize those activities that can be performed at a lower cost,

externalizing in the market domain those activities with cost advantages. It is assumed, however,

that participants in the marketplace are exposed often to different factors which could make them

behave sometimes opportunistically, as they try to cheat the other part/s to their own benefit

(Rialp, 2000).

Coase introduced in 1937 transaction cost into modern economic analysis. Transaction cost

economics later developed by Williamson is based on the assumption that human beings are

bloodedly rational and sometimes display opportunistic behaviour (Douma and Screuder, 1998).

But insofar as people are conceived as possessing limited and bounded rationality, it is clear that

they must incur what is called “transaction costs” and that nonzero transaction costs will be

incurred no matter what sector of economy decision makers are conducting operations in and

what type of activity they are performing. Because of their human limitations, their restricted

knowledge, and their tendency to make errors, real-world decision makers will always function

inefficiently relative to the hypothetical decision makers of neoclassical theory. Transaction cost

is encountered universally because of the character of the individuals who make decisions. Quite

simply put, then, the relationship between imperfect human agents and the cost of running an

economy should be kept in mind when considering the phenomenon of transaction cost

(Furubotn and Richter, 2000, p. 39).

In transaction cost economics the most important unit of analysis is the transaction (Douma and

Screuder, 1998). The transactions take place across markets and within organizations. If a

transaction is allocated to the market or to an organization it depends only of the cost

minimization. Transaction cost economics emphasizes that transaction cost as well as traditional

production costs should be taken into account (Douma and Screuder, 1998). The term transaction

cost includes both costs of market transactions and costs of internal transactions.

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An economic definition of transaction costs is the costs of measuring what is being exchanged

and enforcing agreements (North, 1997). In a larger context of social evolution these are all the

costs involved in human interaction over time. Ronald Coase (1960) forced economists to think

about the costs involved in human interaction. He was concerned to explain the reason for the

existence of the firm in 1937 or the conditions under which the locative implications of

microeconomic theory held in 1960.

Kenneth Arrow defined transaction costs as the “costs of running the economic system” (Arrow,

1969, p. 48). These costs have to be distinguished from production costs, category of costs which

gives a preoccupation to the neoclassical analysis.

Transaction cost economics refer to the problem of economic organization as the problem of

contracting. In the case of contracting we have two types of transaction costs:

1. Ex ante transaction cost. These costs represent costs of drafting, negotiating and

safeguarding an agreement.

2. Ex post transaction costs. These costs include the maladaption costs incurred when

transaction drift out of alignment, the haggling costs incurred if bilateral efforts are made

to correct ex post misalignments and the setup and running costs associated with the

governance structures to which disputes are referred.

The dominant importance of transaction costs in a firm’s efforts to design appropriate

governance structures is somehow questionable. Since transaction costs minimization usually

leads a firm to internalize transactions by adopting integrated governance structures, we would

observe more real-world firms with such structures if transaction costs were in fact salient.

Normative implications for designing governance structures thus should not be driven by

analyzing transaction cost alone; the analysis of production costs and strategic consideration

should be incorporated as well (Bello, Dant and Lohtia, 1997).

Agency theory in its simplest from discusses the relationship between two people, a principal

and an agent who makes decisions on behalf of the principal. Jensen and Mekling (1976) defined

the agency relationship as a contract under which one or more persons (the principal engages

another person, the agent, to perform some service on their behalf which involves delegating

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some decision making authority to the agent). If both parties of the relationship are utility

maximizers there is good reason to believe that the agent will not always act in the best interest

of the principal (Jensen and Mekling, 1976). The principal can limit divergences from his interest

by establishing appropriate incentives for the agent and by incurring monitoring costs designed

to limit the activities of the agent. In this case in some situations it will pay the agent to expend

resources (bonding costs) to guarantee that he will not take certain actions which would harm the

principal or to ensure that the principal will be compensated if he does take such actions.

However it is quite impossible for the principal or the agent at zero cost to ensure that the agent

will make optimal decisions form the principal’s point of view.

In most agency relationships the principal and the agent will incur positive monitoring and

bonding costs (non-pecuniary as well as pecuniary) and in all there will be some divergences

between the agent’s decisions and those decisions which would maximize the welfare of the

principal. This welfare of the principal can be seen as the cost of the agency relationship, and

Jensen and Mekling call this cost the residual loss. They define the agency cost as a sum of

(Jensen and Mekling, 1976):

1. The monitoring expenditure by the principal;

2. The bonding expenditure by the agents;

3. The residual loss.

These aspects are the base of the structure of the contractual relation, between the principal and

the agent to provide incentives for the agent to make choices to maximize the principal’s welfare

in the case that uncertainty and imperfect monitoring exists.

The choice between an integrated or independent distribution channels can be made by following

transaction cost theory and agency theory. Williamson (1981) affirms that according to

transaction cost analysis – a priori- the entrant should choose an independent channel. This

choice enables the entrant to get the benefits of a distribution specialist in the foreign market.

These benefits include economies of scale and scope that the independent distributor obtains by

pooling the demand for distribution services of several manufacturers.

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However, Williamson (1981) proposed that firms can better monitor and motivate their difficult-

to replace distribution agents if these are employees rather than outsiders. If task-specialized

knowledge and relationship are important, then a firm should choose integrated distribution

channels.

Forward integration decisions into foreign markets have been a question widely examined among

big firms like multinational corporations (MNC’s) because they posses large resources that allow

them to invest abroad. More recently it has been detected that an increasing number of small

exporters internalize their commercial networks abroad to a certain degree. In this context, the

level of integration of foreign distribution activity seems to claim greater interest among some

managers and researchers, especially in terms of its deterministic factors (Rialp, 2000).

But many manufacturers find it impractical to integrate vertically into international distribution

(foreign subsidiaries and overseas offices), thus non-integrated modes such as independent,

foreign-based distributors are often relied upon to enter foreign markets (Bello and Lothia,

1995). Such distributors not only offer a relatively easy, low-cost way to distribute more or less

globally but also provide manufacturers with key contacts with foreign buyers, important local-

market knowledge, and sophisticated marketing services (Clasen, 1991).

However due to their inherent assumptions, these theories cannot be applied to our study, that is

focused on the mutually interdependent relationship between a manufacturer and its foreign

distributor, and how trust and commitment are influencing this relationship, so we are orienting

towards relationship marketing.

2.3 The nature of relationship marketing in the international context

In the case of bilateral relationships, the actors in exchange events are often committed to

continuing relationships which involve neither a unified hierarchy nor necessarily comprehensive

and detailed contractual obligations (Heide and Stump, 1994). This type of business relationship

is driven by shared behavioural norms which allow for the adoption of common business

behaviour where opportunistic motives are constrained because of the long term benefits of

conforming to system norms and other social pressures (Dwyer, Schurr and Oh, 1987).

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Marketing represents how important is to develop and nurture relationships, especially when we

talk about the international market. In this case, the focus goes on the distribution channels, on

relationships with foreign suppliers known as the upstream view of the international relationship

marketing, and on relationships with foreign customers, known also as the downstream view.

Figure 2. The relational exchange in relationship marketing (source: Morgan and Hunt, 1994).

Understanding relationship marketing requires distinguishing between the discrete transaction,

which has a "distinct beginning, short duration, and sharp ending by performance," and

relational exchange, which "traces to previous agreements [and] ... is longer in duration,

reflecting an ongoing process" (Dwyer, Schurr and Oh, 1987, p. 13).

Conspicuously missing from all extant definitions of relationship marketing is the specific

recognition that many instances of relationship marketing do not have a "customer" as one of the

exchange participants. Strictly speaking, in strategic alliances between competitors, partnerships

between firms and government in public-purpose partnerships, and internal marketing, there are

neither "buyers," "sellers." "customers" nor "key accounts"—or/and partners exchanging

resources (see Fig. 2).

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The IRM (International Relationship Marketing) literature consists of three groups of studies:

upstream, downstream, and dyadic (Samiee and Walters, 2003). The data appears to indicate that

there are important differences in relationships as a result of directional factors. Upstream

relationships are often asymmetrical because manufacturers and other upstream suppliers tend to

be larger and more powerful (Kumar, Scheer and Steenkamp, 1995). This condition typically

results in low levels of intra-channel trust, cooperation, and relationship stability (Anderson and

Weitz, 1989; Dwyer, Schurr and Oh, 1987). Scholarly effort has focused on developing a better

understanding of these relationships and, not surprisingly, over one-half of IRM studies reviewed

examine relationships between firms and their suppliers, i.e., upstream (Samiee and Walters,

2003).

The focus in our case should be on the downstream relationships, which tend to exhibit rather

different characteristics and here is where the focus will be put on. Customers tend to be smaller

than supplier firms (and presumably individually less important because firms tend to depend on

many more customers than suppliers) which affords the latter significant potential power in the

relationship. This is tempered by the fact that customers are the main source of revenue for

suppliers which, in turn, implies that supplier firms need to manage relationships to maintain

customer satisfaction and ensure relationship continuity.

Despite this critically important issue, fewer studies investigated relationships between firms and

their downstream customers (Samiee and Walters, 2003). Given that businesses tend to be most

concerned about understanding and enhancing conditions and relationships that directly affect

revenues, the paucity of studies examining relationships with customers is surprising.

Events all over the world demonstrate that the international environment surrounding a domestic

manufacturer and its foreign-based distributor can pose serious difficulties for a trading

relationship. Likewise, strong cultural, religious, and ethnic differences between the firms’

personnel may limit the socialization and shared expectations needed to develop and maintain

highly coordinated actions (Root, 1994).

Additionally, greater perceived quality of buyer-supplier interactions increases commitment to

the relationship and patronage (Grayson and Ambler, 1999). Kumar, Scheer and Steenkamp

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(1995) found that relationship quality is related to perceived distributive and procedural fairness.

They note further that the customer’s perception of fairness had a greater effect on relationship

quality than the supplier’s view.

The authors also reported that relationship quality is negatively impacted by environmental

uncertainty. Chien and Moutinho (2000) reported that the level of involvement in relationships

and information exchange are instrumental in developing and maintaining marketing

relationships and for buying behaviour and legitimacy.

Grayson and Ambler (1999) found that the higher the perceived quality of buyer–seller

interactions and the greater the supplier’s involvement in the buyer’s marketing process, the

greater the commitment by the buyer to the relationship. Perceptions of a supplier’s commercial

and technical competence are also associated with perceived supplier commitment to the

relationship (Ford, 1984). Commitment has also been found to be reciprocal in nature with

successful relationships relying on commitment from both parties (O’Malley, Patterson, and

Evans, 1997).

In the case of trust, the upstream studies found that it is associated with lower opportunism/loss

of objectivity (Grayson and Ambler, 1999). The authors also report that trust is associated with

rising expectations which, in turn, are associated with greater involvement, interaction, and

commitment. Higher levels of reciprocal trust were found to be associated with customers’

perceptions of the utilitarian value of suppliers (Chien and Moutinho, 2000). Thus, customers

seem to place greater value on relationships in which they perceive a high level of reciprocal

trust.

Though there are many contextual factors that contribute to the success or failure of specific

relationship marketing efforts, Morgan and Hunt (1994) theorize that the presence of relationship

commitment and trust is central to successful relationship marketing, which can be expected to

be even more important in the international marketing context.

In earlier studies concerning buyer–seller relationships within networks, the trade-off between

cooperation and competition has been emphasized as a mean of creating progress among actors

involved in long-term relationships.

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Research on cooperation and competition between horizontal actors has been conducted within

different theoretical fields. In literature using the network approach, horizontal relationships have

been studied indirectly, as they are seen as a consequence of competitors’ relationships to buyers,

suppliers etc. (Gadde and Mattsson, 1987). Interaction between competitors is, on the contrary,

seen as direct in economic theory, but the focus is placed on structures rather than relationships

(Scherer, 1980).

Competition is described as the direct rivalry that develops between firms due to the dependency

that structural conditions within the industry give rise to. Intense rivalry between many firms is

argued to be the most beneficial interaction, and cooperation is considered to hamper effective

competitive interaction. Finally, in literature on strategic alliances (Ring and Van de Ven, 1992;

Yoshino and Rangan, 1995) or business alliances (Sheth, and Parvatiyar, 1992) relationships

rather than structures are studied, and they are seen as direct rather than indirect consequences of

vertical relationships. Cooperation among competitors is analyzed and argued to be

advantageous in that firm’s resources and capabilities can be combined and used in competition

with others.

Significant insights about horizontal relationships have been reached in the theoretical fields

mentioned, but the trade-off between cooperation and competition has not been fully addressed.

A firm is usually assumed to cooperate with one competitor and compete with another, thereby

participating in totally different relationships with different actors. In accordance with Hunt

(1996), it is argued that competitors can be involved in both cooperative and competitive

relationships with each other simultaneously and benefit from both, and hence that it is of

importance to emphasize both the cooperative and competitive dimensions of a relationship:

For a theory of competition to provide a theoretical foundation for relationship marketing, the

theory must admit at least the possibility that some kinds of cooperative relationships among

firms may actually enhance competition, rather than thwart it. The dyadic and paradoxical

relationship that emerges when two firms cooperate in some activities, such as in a strategic

alliance, and at the same time compete with each other in other activities is called “coopetition”

(Hunt, 1996).

21

Coopetitive relationships are complex as they consist of two diametrically different logics of

interaction. Actors involved in coopetition are involved in a relationship that on the one hand

consists of hostility due to conflicting interests and on the other hand consists of friendliness due

to common interests. These two logics of interaction are in conflict with each other and must be

separated in a proper way to make a coopetitive relationship possible.

Rivalry and conflict are seen as a threat because they can hamper the performance of a strategic

alliance. In contrast cooperation in economic theory is argued to hamper competition and

antitrust law is seen as necessary to guarantee healthy competition. Both in traditional theory

about competition and in literature on strategic alliances, the assumption has been that

cooperation in the first case and competition in the other case need to be minimized to get

competition and cooperation to work. The possibility of combining cooperation and competition

to receive advantages provided by coopetition between two parties can thereby be overlooked

(Jorde and Teece, 1989).

2.4 The Commitment-Trust Theory of Relationship Marketing

There are many contextual factors that contribute to the success or failure of specific relationship

marketing efforts, but Morgan and Hunt (1994) theorize that the presence of relationship

commitment and trust is central to successful relationship marketing, not power and its ability to

"condition others". Commitment and trust are "key" because they encourage marketers to:

1) Work at preserving relationship investments by cooperating with exchange partners,

2) Resist attractive short-term alternatives in favour of the expected long-term benefits of staying

with existing partners, and

3) View potentially high-risk actions as being prudent because of the belief that their partners

will not act opportunistically.

Therefore, when both commitment and trust, not just one or the other, are present, they produce

outcomes that promote efficiency, productivity, and effectiveness. In short, commitment and

trust lead directly to cooperative behaviours that are conducive to relationship marketing success

22

(Morgan and Hunt, 1994). Their theory implies a model of relationship marketing which focuses

on one party in the relational exchange and that party's commitment and trust.

Figure 3. The KMV model of relationship marketing (source: Morgan and Hunt, 1994).

Morgan and Hunt’s theory (Morgan and Hunt, 1994) implies what they label the key mediating

variable (KMV) model of relationship marketing (figure 3), which focuses on one party in the

relational exchange and that party's relationship commitment and trust. Because they hypothesize

that relationship commitment and trust are key constructs, they position them as mediating

variables between five important antecedents (i.e.. relationship termination costs, relationship

benefits, shared values, communication, and opportunistic behaviour) and five outcomes (i.e.,

acquiescence, propensity to leave, cooperation, functional conflict, and decision-making

uncertainty).

Trust and commitment are key elements for relationship marketing strategy success (Siguaw,

Simpson and Baker, 1998). These two variables are necessary to both partners if they wish to

23

continue the relationship, obtain a greater satisfaction with the financial results and increase their

performance.

Morgan and Hunt (1994) conceptualize trust as existing when one party has confidence in an

exchange partner's reliability and integrity. Their definition parallels that of Moorman,

Deshpande and Zaltman (1993, p. 82):

"Trust is defined as a willingness to rely on an exchange partner in whom one has confidence."

The literature on trust suggests that confidence on the part of the trusting party results from the

firm belief that the trustworthy party is both reliable and has high integrity, which are associated

with such qualities as consistent, competent, honest, fair, responsible and helpful. Anderson and

Narus (1990) focus on the perceived outcomes of trust when they define it as "the firm's belief

that another company will perform actions that will result in positive outcomes for the firm as

well as not take unexpected actions that result in negative outcomes." Also, trust is considered as

an essential factor for inter-firm relationships success (Dwyer, Schurr and Oh, 1987; Moorman,

Deshpande and Zaltman, 1993; Morgan and Hunt, 1994; Geykens, Steenkamp and Kumar,

1998).

The conceptualizations of trust have in common determinant variables, such as one party’s

expectation (Anderson and Narus, 1990; Morgan and Hunt, 1994; Wilson, 1995), a partner’s

integrity in intentions and behaviours (Morgan and Hunt, 1994), satisfaction of needs (Anderson

and Narus, 1990), absence of negative results (Anderson and Narus, 1990) and effect on

commitment (Moorman, Deshpande and Zaltman, 1992). From the marketing perspective, trust

is characterized both by the expectation of the partner’s honesty and experience, as well as the

other party’s intentions and benevolence. In this context, the majority of studies have shown that

the dimensions of trust are benevolence and credibility.

Trust has been measured by benevolence – the partner is interested in the other partner’s well-

being, even in unpredictable situations, so that they will never take any actions which may affect

them negatively; and credibility – belief that the partner will perform in an effective and reliable

way; it reflects a partner’s honesty or security that the other party will fulfil its promises

24

(Geykens and Steenkamp, 1995). As shown in Table 1, different authors have measured trust by

other variables such as: benevolence, honesty and credibility.

Table 1. Operationalization of trust (source: Bordonaba-Juste and Polo-Redondo, 2004).

Authors Measurements

Anderson, Lodish and Weitz (1987) Benevolence

Dwyer and Oh (1987) Benevolence and honesty

Anderson and Weitz (1989)(i) Benevolence

Anderson and Narus (1990)(ii) Benevolence and honesty

Andaleeb (1991) Benevolence and honesty

Moorman, Zaltman and Deshpande (1992) Benevolence and credibility

Scheer and Stern (1992) Honesty

Moorman, Desphande and Zaltman (1993) Credibility

Morgan and Hunt (1994) Honesty

Andaleeb (1996) Benevolence and honesty

Dahlstrom and Nygaard (1995) Benevolence

Geykens and Steenkamp (1995) Benevolence and honesty

Geykens et al. (1998) Benevolence and honesty

Siguaw, Simpson and Baker (1998) Benevolence and honesty

(i) Anderson and Weitz (1989) employed a global measure of trust that reflects several dimensions (expectation,

benevolence and risk).

(ii) Anderson and Narus (1990) used a global scale of trust from distributor’s perspective and operationalized only

the dimension of benevolence from manufacturer’s side.

Relationships that are characterized by trust are so highly valued that parties will desire to

commit themselves to such relationships. Indeed, because commitment entails vulnerability,

parties will seek only trustworthy partners. Therefore Achrol (1991) affirms that trust is a major

determinant of relationship commitment. As well Moorman, Zaitman, and Deshpande (1992)

find that trust by marketing research users in their research providers significantly affected user

commitment to the research relationship.

25

Morgan and Hunt (1994) propose that relationship commitment is central to relationship

marketing and a critically important element for the success of long-term relationships (Dwyer,

Schurr and Oh, 1987; Morgan and Hunt, 1994). Drawing on the conceptualizations of

commitment in social exchange (Cook and Emerson 1978), marriage (Thompson and Spanier

1983), and organizations (Meyer and Allen 1984), Morgan and Hunt (1994) define relationship

commitment as an exchange partner believing that an ongoing relationship with another is so

important as to warrant maximum efforts at maintaining it; that is, the committed party believes

the relationship is worth working on to ensure that it endures indefinitely. Morgan and Hunt’s

definition corresponds almost exactly with that one also developed by Moorman, Zaltman and

Deshpande (1992, p. 316):

"Commitment to the relationship is defined as an enduring desire to maintain a valued

relationship."

In other words, marketing researchers have defined commitment as a desire to develop stable

relationships, a willingness to make short-term sacrifices to maintain the relationship and a

security in the stability of the relationship (Anderson and Weitz, 1992; Siguaw, Simpson and

Baker, 1998), a belief that an ongoing relationship with another party is so valuable as to warrant

all the possible efforts at maintaining it (Morgan and Hunt, 1994) or efforts to maintain the

relationship in which one wishes to continue (Wilson, 1995).

From the international marketing perspective, channel research has identified two dimensions of

commitment: an attitudinal commitment and a behavioural component. In this context, the

majority of studies have identified the attitudinal component of commitment as a belief, desire,

promise or a positive attitude to continue the relationship (Dwyer, Schurr and Oh, 1987;

Anderson and Weitz, 1992; Morgan and Hunt, 1994). However, other authors have defined the

behavioural component of commitment as the efforts carried out in the relationship or the degree

in which a channel member supports partners in difficult moments. Table 2 shows what other

dimensions of commitment have been discovered by different authors like: intention to maintain

the relationship, intention and effort to maintain the relationship, desire to continue the

relationship, intention to invest and expectation of continuity.

26

Table 2. Operationalization of commitment in channel relationships (source: Bordonaba-Juste

and Polo-Redondo, 2004).

Authors Commitment view

Anderson and

Weitz (1992)

Global scale of ten item which reflects an emotional facet of the

commitment (loyalty) and continuation (intention to invest, intention to

maintain the relationship and expectation of continuity)

Scheer and Stern

(1992)

Two-item global scale that measures the continuation (intention to

maintain the relationship)

Morgan and Hunt

(1994)

Global scale of seven items that reflects an economic facet of commitment

(importance), feelings (emotional desire) and continuation (intention and

effort to continue the relationship)

Kumar, Scheer and

Steenkamp (1995)

Scale of three items measuring the affective facet of commitment (desire

to maintain the relationship)

Mohr, Fisher and

Nevin (1996)

Three-item scale that measures the degree to which one channel member

(dealer) feels committed to the other party (manufacturer) and wants to

continue the relationship

Simpson and Mayo

(1997)

Scale of 4 items that measures the degree to which partners commit to the

continuity of the relationship due to affective reasons

Siguaw, Simpson

and Baker (1998)

Four-item scale of Anderson and Weitz (1992) which reflects feelings

(loyalty) and continuity of the relationship (willingness to invest)

3. Adopted conceptual framework

As mentioned in the introduction section, the aim of this work is to investigate empirically if

trust and commitment are indeed essential variables for the success of inter-firm relationships in

the international distribution system. As Morgan and Hunt (1994) theorize that the presence of

relationship commitment and trust is central to successful relationship marketing, this new model

is an extent to the general model of Morgan and Hunt (1994) and is showing that also trust and

commitment are central to successful international relationship market. The idea is that

27

international partnering especially requires the development of long-term relationships between

the members of the channel, and here trust and commitment may play a very important role in

the success of this type of relationships (Dyer, Schurr and Oh, 1987; Morgan and Hunt, 1994).

The focused international partnering represents the relationship between the seller (manufacturer,

exporter) and an international buyer (distributor, importer) located in the foreign market.

Thus, in this study we focus on trust and commitment between international partners, and how

these two key characteristics of long and durable partnering can be affecting the relationship

between firms. In the same way this study tries to show how mutual trust and commitment are

influencing each other, and are influenced at their turn by different variables, considering the

conditions of the market and the relationship between firms. Trust and commitment are the key

characteristics for relationship success as Morgan and Hunt (1994) have stated, and this refers to

the relationship between a seller and its international buyer, from the seller point of view but

focusing on international distribution relations. In this situation we are adopting the same view

stated by Morgan and Hunt (1994) in this study.

The model presented below tries to explain the mediating role of commitment and trust between

some antecedents (communication, information exchange and potential relationship benefits) and

different outcomes (satisfaction, performance and cooperation) in the international market.

Communication and information exchange are influenced by psychic distance, and cooperation is

directly influenced by foreign market volatility, both psychic distance and foreign market

volatility representing the foreign market characteristics. The evaluation of the proposed model

is made for the manufacturer’s perspective.

28

Figure 3. Research model (partly adopted from Morgan and Hunt, 1994; Bordonaba-Juste and

Polo-Redondo (2004) and self elaborated).

Because commitment entails vulnerability, parties will seek only trustworthy partners, which

mean that trust is supposedly very important to relational exchange. Therefore, Morgan and Hunt

(1994) affirm that trust is a major determinant of relationship commitment. In the same way,

Moorman, Zaitman, and Deshpande (1992) find that trust by marketing research users in their

research providers significantly affected user commitment to the research relationship.

A direct link between trust and commitment often has been reported in the literature (Andaleeb

1996, Moorman, Zaltman, and Deshpande 1992; Morgan and Hunt 1994). Siguaw, Simpson and

Baker (1998) propose that the distributor's trust in the supplier will influence its commitment to

the relationship with the supplier, because we believe that commitment to a relationship would

not be established without a foundation of trust in place.

Considering the consequences of trust, Anderson affirms that there is a causal path from trust to

cooperation (Anderson and Narus, 1984; Dwyer, Schurr and Oh, 1987). Regarding this issue,

Communication

and Information

exchange

Performance

Satisfaction

TRUST

COMMITMENT

Relationship benefits

Cooperation

Foreign Market

volatility

Ps

ychi

c di

stan

ce

29

there are studies which show the positive effect of cooperation on trust (Anderson and Narus,

1990), but other authors show there is a positive effect of trust on cooperation (Morgan and

Hunt, 1994). On the other hand, several studies have proved that communication between parties

have an influence on the development of trust in a relationship (Dwyer, Schurr and Oh, 1987;

Anderson and Weitz, 1989; Anderson and Narus, 1990; Moorman, Deshpande and Zoltman,

1993; Geykens, Steenkamp and Kumar, 1998) since information exchanged aligns partners’

expectations and perceptions. Therefore, cooperation and communication helps partners to share

information and resources, which in turn can increase trust.

3.1 Antecedents of relationship commitment and trust

As shown in the research model, the following proposed antecedents of the relationship of

commitment and trust are: (1a) communication directly influences trust, (1b) information

exchange directly influences trust, and (2) relationship benefits directly influence commitment.

Communication and information exchange

A major precursor of trust is communication, which can be defined broadly as a process of

transferring information from one entity to another. Communication processes are sign-mediated

interactions between at least two agents which share a repertoire of signs and semiotic rules.

Communication, especially timely communication (Moorman. Desbpande and Zaltman, 1993),

fosters trust by assisting in resolving disputes and aligning perceptions and expectations.

Anderson and Narus (1990) affirm that past communication is an antecedent of trust, but "in

subsequent periods ... this accumulation of trust leads to better communication". In other words

"communication can be described as the glue that holds together a channel of

distribution…empirical research on channel communication is sparse" (Mohr and Nevin, 1990).

Nonetheless, Anderson and Narus (1990) find that, from both the manufacturer's and distributor's

perspectives, past communication was positively related to trust.

Information exchange is a coordination mechanism because the “parties proactively provide

information useful to the partner…the buyer can be expected to provide unforeseen information

that may affect supplier operations (Heide and John, 1992). Information exchange represents

“the formal as well as informal sharing of meaningful and timely information between firms”

30

(Anderson and Narus, 1990). Timely information can address simple as well as complex

independencies by alerting a partner of changed requirements and thus enabling it to adjust its

own activities and resources.

Information coming from the distributor keeps the manufacturer informed about the changes that

occur in the specific foreign market, ensuring faster and better adaptation. Conversely,

information coming from the manufacturer keeps the distributor informed about manufacturer’s

product and promotion decisions, enhancing the distributor chance for success. As the parties are

better informed about each other situation, both internally and with respect to their environment,

they tend to exhibit an attitude characterized by solidarity and flexibility in accommodating

different needs of the partner that can arise as the marketplace changes unexpectedly. According

to some studies (Munro and Beamish, 1987; Bello, Chelariu and Zhang, 2003), few

manufacturers engage in obtaining and analyzing data from their international distributors, with

respect to foreign sales, market penetration, and market trends.

Relationship benefits. Competition, particularly in the global marketplace, requires that firms

continually seek out products, processes, and technologies that add value to their own offerings.

Relationship marketing theory suggests that partner selection may be a critical element in

competitive strategy. As Webster (1991) notes for industrial marketers, "the firm's procurement

strategy may be the most important ingredient in its ability to deliver superior value to its

customers" (emphasis in original). Because partners that deliver superior benefits will be highly

valued, firms will commit themselves to establishing, developing and maintaining relationships

with such partners. Therefore, Morgan and Hunt (1994) posit that firms potentially receiving

superior benefits from their partnership, relative to other options, on such dimensions as product

profitability, customer satisfaction, and product performance, will be more committed to the

relationship.

3.2 Outcomes of Relationship Commitment and Trust

As components of the relationship development process, relationship commitment and trust are,

per se, highly desirable "qualitative outcomes" (Mohr and Nevin, 1990). Therefore, as shown in

Figure 3, there are three expected outcomes: (1) satisfaction is directly influenced by trust and

31

relationship commitment, (2) performance is directly influenced by trust and commitment, and

(3), and most importantly, it is proposed that cooperation arises directly from both relationship

commitment and trust.

Performance. Manufacturers often fear that the foreign distributor does not devote adequate

resources to its brand while the distributor may fear that it is being used to pioneer a foreign

market only to be bypassed once it develops the market (Bello et al., 1996). When a

manufacturer trusts in his/her partner, it is believed that the partners will not perform actions that

will result in negative outcomes for any of the firms, will not behave in an opportunistic form

and will perform actions that serve each partner’s interest. These reflect signs that every partner

desires the continuity of the relationship. In this sense, with trust, partners can behave in a more

efficient manner, and therefore relationship performance is improved (Dahlstrom and Nygaard,

1995).

Commitment to a relationship frequently is believed to result in a higher performance level

(Stern and El-Ansary 1990). With an increase of commitment, partners begin to consider long-

term result of the relationship and this is in the interest of both partners, not only for one of them.

Therefore, it is also considered that relational commitment has a positive influence on a higher

level of performance (Blankemburg, Eriksson and Johanson, 1996; Stern and El-Ansaray, 1990;

Heide and Stump, 1995).

Satisfaction. During the exchange process, the manufacturer’s trust in the distributor and vice

versa, increases the security of the manufacturers that his partner’s actions will have positive

results, which produces a greater mutual satisfaction (Dyer and Oh, 1987). In the same way, the

commitment between partners helps believing in positive results for both of them, with an

increase of mutual satisfaction (Mohr and Spekman, 1994).

Cooperation is an outcome posited to be influenced directly by both relationship commitment

and trust. A partner committed to the relationship will cooperate with another member because

of a desire to make the relationship work. Both theory and empirical evidence indicate that trust

also leads to cooperation. Anderson and Narus (1990, p. 45) state:

32

"Once trust is established, firms learn that coordinated, joint efforts will lead to outcomes that

exceed what the firm would achieve if it acted solely in its own best interests".

3.3 Foreign market characteristics

Characteristics of international markets can also impact the quality and closeness of the

relationship that develops between manufacturers and their foreign-based distributors (Bello et

al., 1996). Usually, the foreign volatility of the market and the psychic distance tends particularly

to inhibit the establishment of relationalism within the export channel due to the uncertainty that

both factors generate. Under conditions of high market volatility, the task interdependencies that

link the parties become uncertain, and the resulting task ambiguity erodes the flexibility and

solidarity between the firms. Such market conditions make each firm less able to forecast its own

changing requirements, let alone understand and anticipate the variable resource needs of its

partner. This suggests that market volatility is a critical issue for exporters because ‘‘a principal

source of uncertainty is the variability or the instability of resources and/or influences in the

environment’’ (Achrol et al., 1983).

Likewise, foreign countries with very different cultures, customs, and business practices can

create uncertainty and pose serious problems for manufacturers, as they attempt to develop and

maintain channel relationships with foreign-based intermediaries (Klein and Roth, 1990).

Foreign Market volatility refers to the extent the foreign market changes rapidly and permits the

manufacturer to be caught by surprise (Klein et al., 1990). Scott (1987) notes that uncertainty has

been found to imply both tight and loose couplings between decision-making units. This implies

that volatile foreign market conditions may either motivate the parties to engage in close

cooperative actions to respond more effectively to change or it may lead the parties to reduce

their reliance on each other as they retain flexible channel policies in the face of rapid change.

Achrol et al. (1983) argue that if the uncertainty in input–output sectors of the environment

cannot be absorbed by effective coordination, the level of dysfunctional conflict will escalate and

the channel dyad will move to a ‘‘looser’’ relationship.

Unlike purely domestic channels, export trading arrangements may expose the parties to

heightened volatility due to a much greater potential for unanticipated disruptions in the

33

economic, political, and demand facets of their exchange environment (Klein et al., 1990). This

perspective is reinforced by Bello and Gilliland (1997) who note that: volatility in a foreign

market may thwart the establishment of cooperation norms, such as flexibility, because volatility

disrupts the routinization necessary for shared understandings to develop between distant trading

partners (Hofstede, 1984). In a cross-border setting, the parties tend to reduce flexible behaviour

for fear of their inability to forecast the consequences of their actions and out of concern for

possible opportunistic behaviour by their dyadic partner.

Consequently, given the higher levels of uncertainty associated with international environments,

volatility may tend to reduce the ease with which the parties can understand and anticipate the

task interdependencies that link their export activities. Such volatility can yield a level of task

ambiguity that greatly diminishes the willingness and ability of the parties to share information,

adapt flexibly to each others needs, and exhibit solidarity in their relationship.

Psychic distance, in turn, refers to fundamental differences between the home and foreign market

that make it difficult or problematic for a firm to formulate and implement international business

strategies (Klein and Roth, 1990). Johansen and Valhne (1990, p. 13) note that “psychic distance

is defined in terms of factors such as differences in language, culture, ... which disturb the flow

of information between the firm and the market”. The relationship with the foreign partner may

be inhibited by a breakdown in communication because of distortions in the information

transmission process that occur across cultural boundaries. As export partners fail to share a

common frame of reference, long-term relationships become difficult to maintain due to the

difficulties inherent in the encoding and decoding of communications across cultures (Terpstra

and David, 1991).

In particular, Mohr and Nevin (1990) suggest that channel conditions, such as psychic distance,

can make several aspects of the communication process difficult and uncertain. Differences

between countries have been noted to reduce the frequency of information exchange between

trading partners to the detriment of coordination within the channel (Munro and Beamish, 1987).

Also, the method used to transmit information is often less effective because high-touch modes

(face to face, telephone) that are able to transmit more complex data tend to be used less as

cultural gaps increase (Terpstra and David, 1991).

34

3.4 Propositions

P1: The greater communication and information exchange, the greater will be partners’ trust in

each other.

P2: The greater the trust between partners, the greater will be the commitment between

themselves.

P3: The greater the level of manufacturers ’ trust and commitment in foreign distributors and

vice versa, the greater will be their satisfaction.

P4: The greater the level of manufacturers ’ trust and commitment in foreign distributors and

vice versa, the greater will be their performance.

P5: The greater the level of manufacturers’ trust and commitment in foreign distributors and

vice versa, the greater will be their cooperation.

P6: There is a negative relationship between psychic distance and, communication/ information

exchange.

P7: There is a negative relationship between foreign market volatility and cooperation.

P8: There is a positive relationship between psychic distance and foreign market volatility.

4. Methodology

Qualitative researchers aim to gather an in-depth understanding of human behaviour and the

reasons that govern such behaviour. The qualitative method investigates the why and how of

decision making, not just what, where, when. Hence, smaller but focused samples are more often

needed, rather than large random samples. The qualitative approach is appropriate for this study

which aim is to gain insights, provide a better understanding, and describing the phenomena,

which would help to build a framework rather than to test one (Eisenhardt, 1989). This type of

study typically combines data collection methods such as archives, interviews, questionnaires

and observations (Eisenhardt, 1989).

35

The qualitative research is based on exploratory research, which is a type of research conducted

because a problem has not been clearly defined. Exploratory research helps determine the best

research design, data collection method and selection of subjects. Given its fundamental nature,

exploratory research often concludes that a perceived problem does not actually exist. It often

relies on secondary research such as reviewing available literature and/or data, or qualitative

approaches such as informal discussions with consumers, employees, management or

competitors, and more formal approaches through in-depth interviews, focus groups, projective

methods, case studies or pilot studies.

Exploratory case studies based on primary data are more appropriate to use when the existing

data about the firms is not sufficient and when the inductive process of data generation involved

in such a method is anticipated to provide a greater understanding and a broader description of

processes and meaning (Doherty and Alexander, 2004). Considering the objective of the study,

its context and recommendations from the research of literature review, the confirmatory case-

based research is chosen. The adoption of a qualitative approach provides for a holistic means of

data gathering, analysis, interpretation, and understanding that is particularly suited to research

that investigates the “why” and “how” of management decision making in organizations

(Gummesson, 2000).

In order to apply the case-studies, in-depth interviews were realized to the firms chosen from the

area of Barcelona, in order to “understand the existing dynamics existing in singular contexts”

(Eisenhardt, 1989). For this reason a series of four interviews with four different manufacturer

exporting firms and distributor firms would generate enough data for our study. As Eisenhardt

(1989) said, the ideal number of case studies should be between four and ten, because less than

four does not provide enough information and with more than ten, it becomes difficult to cope

with the complexity and volume of data. Multiple-case approach enables to identify the

similarities and differences within cases as well as between groups of cases (Eisenhardt, 1989).

4.1 Methods of data collection and sources of information

The search for available information about companies for this study started in October 2008 by

accessing a Spanish database SABI. During the search in the Spanish database, exporting

36

companies were chosen that had to fulfil two criteria: to be located in the region of Barcelona,

Spain and to be of different sizes (small, medium and large). The definition used for SMEs is

following the one proposed by the European Commission which considers the SMEs sector as

composed of enterprises with less than 250 employees and disaggregates them into micro-,

small-, and medium-sized companies with fewer than 10, 50 and 250 employees respectively

(European Commission, Department of Trade and Industry 2000). Large companies refer to

enterprises with over 250 employees (European Commission, 2000).

The study is based on multiple sources of information, like primary and secondary data. Before

the interviews, the secondary data was obtained about the selected cases through product and

firm brochures, internal documentation made available by the firms and the internet websites of

the SMEs. The secondary data is very important because gives the possibility to get familiar with

the firms and with their business activity, as well as to be prepared for interviews. Regarding the

primary data, for the in-depth interviews, a number of structured questions were prepared in

advanced. The aim with these questions was to prepare easy understandable questions for the

interview, which would help gain insights considering the proposed objectives. The final general

guideline for the interview is presented in Annex 1.

The methodology chosen in order to analyse the empirical data is qualitative, relying on the

propositions testing approach (which refers to formulate different propositions and trying to test

them through a few case studies) and the conducted analysis including both within-case analysis

and cross case analysis. The within-case analysis is conducted, within each case, at each unit of

analysis level. The identified similarities and dissimilarities with the frame of reference provide

findings for each case. Also, cross-case analysis is conducted meaning a comparison among the

findings from the cases. The comparative analysis is also implemented at each unit of analysis

level.

There analysis is based on three information sources. First of all, the scientific articles, working

papers, conference articles, doctoral thesis, and other types of papers related with the theme.

These investigations were obtained from the databases: ISI Web of Knowledge, Science Direct,

Scholar. Google, Abi-Inform, among others. Once the literature review having been realized, the

second source of information was used, which includes the in-depth interview to the managers

37

and employees of the firms. Finally, the exporter firms listed in the SABI Database was used.

The first two sources above-mentioned represent a primary information source and the last one a

secondary information source. Realizing an investigation that contains the both types of

information sources – primary and secondary – is expected to improve the quality of it by

realizing a triangulation.

4.2 Case selection and measures

The four enterprises included in the sample were chosen according to the following selection

criteria:

• belong to manufacturing sector (belonging to different sectors in order to get a general

view of the market),

• based in Catalonia (Spain),

• size {employ less than 250 people (in line with the European Union’s criteria for defining

SMEs) and over 250 people (in line with the European Union’s criteria for defining large

firms)},

• be current exporters, by means of agents/distributors abroad to both very close (France)

and very distant (South Africa and Saudi Arabia) foreign markets as compared to Spain,

• newly established vs. long established (we are interested in companies that have a long

relationship with their distributors but also in companies that have just started dealing

with a new distributor),

• external validity/reliability.

In November 2008, more than 100 firms belonging to the manufacturing sector located in

Catalonia (Spain) during a time period of three months: November 2008-January 2009, were

asked via e-mail to participate in this research study. Once the key informants in the companies

agreed to participate in the study telephone contact was established. From all the firms that

answered our invitation to participate in the development of this project, four companies were

purposefully chosen due to their interesting characteristics of their relationship with their foreign

distributors. In the process of deciding which firms should be interviewed, we took into

consideration some important characteristics like size, sector, new or old established exporters.

38

Considering the sector we were interested in companies belonging to different sectors of the

market in order to get as much information about manufacturer-distributor relations in different

businesses, that would give to this study more validity. Referring to size, as the economy in

Spain is based more on small and medium enterprises, we chose three small firms and only one

large company. This should provide more validity to this study and also offer an extended view

of the market with its relationships.

Another important characteristic was time, meaning new established relations with foreign

distributors or old/long established relations with foreign distributors. In this study we are

interested in companies that have a long-lasting relationship with their distributors but also in

companies that have just started dealing with a new distributor in order to have a better and

clearer image about how relationships start and evolve in time, and how can they be improved.

After choosing the four companies for the study, one interview was personally conducted for

each company. Each interview was conducted by the author and took between two and three

hours, while everything was recorded and detailed notes were taken as well. The person

interviewed belonged to the decision makers compartment (the person in charge of the export

activity in the company: owners, export manager or director) and they were conducted in each

company, using a pre-established interview schedule which contained a number of structured

questions as well as open-ended questions (see Annex 1). The same study protocol was used for

each specific enterprise, thus giving reliability to the research.

The main constructs presented in this research are trust and commitment, and the study aims to

find out their influence on the relationship between manufacturers and international distributors

firms.

Trust is measured by the degree in which a party (the manufacturer firm) perceives the partner’s

benevolence and credibility (the distributor firm) (Siguaw, Simpson and Baker, 1998). The

manufacturer’s commitment construct reflects several variables: willingness to invest, loyalty,

willingness to make sacrifices to achieve long-term benefits and expectation of continuity

(Anderson and Weitz, 1992; Siguaw, Simpson and Baker, 1998).

39

The satisfaction construct is build to reflect on one way the manufacturer’s satisfaction

(Andaleeb, 1996), while the performance construct measures on one hand the level of

manufacturer’s success for the activities of direction and marketing; and on the other hand the

level of efficiency and productivity, which reflects aspects of sale growth, benefits growth,

benefits and productivity (Dahlstrom and Nygaard, 1995).

5. Results and discussion

In this section are presented the results of the data collection, which consists of two steps:

• Individual case analysis, which consist of a brief description of each case;

• Comparative analysis, which represents the most important part and is analyzing the

firms in accordance with the research propositions. In this analysis the comparison is

made between cases taking into consideration the findings presented in the literature

review. The analysis is focused on the similarities and differences between the 4

exporting firms studied and between the relationship of these firms with their foreign

distributors.

The analysis will try to give a final response to all the questions that the model is raising towards

the relationship between manufacturers and their foreign distributors:

Table 3. Key research questions

P1 Is mutual communication and information exchange going to increase partners’ trust in each other?

P2 Does trust between the partners going to increase the commitment in the relationship?

P3 Is trust and commitment between partners going to increase the level of satisfaction?

P4 Is trust and commitment between partners going to increase the level of their performance?

P5 Does the of manufacturers’ trust and commitment in foreign distributors affect their mutual cooperation?

P6 In what way the cultural, economic, political and legal differences between the countries are influencing the communication and the information exchange between partners?

P7 In what way the rapid the changes in the foreign market are affecting the cooperation between partners?

P8 What kind of relationship exists between the cultural, political and economical differences and the rapid changes in the foreign market?

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A. Case INDO

Indo International, SL is a Spanish multinational dedicated to the production and marketing of

ophthalmic lenses, frames, sunglasses and equipment for opticians and ophthalmologists. The

company has more than 70 years’ experience in the optical industry and continues to lead the

Spanish market, while progressing with its international expansion, being currently ranked

eleventh worldwide in terms of turnover.

With a staff of more than 1500, 1100 of whom work in Spain, Indo currently has six production

centers in Spain, China, Thailand and Morocco, and branches in the United States, France, Italy,

Portugal, India, Morocco and Chile. It exports its products to more than 80 countries, counting

30% export income from total sales.

Their mission consists of creating value to help you see and look better. Their vision is to be an

international benchmark for visual satisfaction by creating value through a human team,

innovation and respect for society and the environment. This philosophy is based on 5 key

commitments to offer personalized optics in closer contact with users’ needs: innovation in all

company areas, customer satisfaction, employee satisfaction, sustained value creation, and

respect for society and the environment.

Indo International, SL was founded in Seville in 1937 by the brothers Rolando, Fernando and

Renato Cottet. Below is an extract of a letter written by Rolando Cottet when the company was

founded in 1937:

“As you will recall, we left Seville with the intention of setting up a retail business in Bilbao, and

we did everything humanly possible to achieve this. However, we did not have any premises and,

after six months, could find no way to solve the problem unless we paid more than 100,000

pesetas for conveyance of premises, which naturally was of no interest to us. In view of the

difficulties we came up against in Bilbao, we thought about setting up our business here, but the

result was negative here, too. Furthermore, all the equipment we ordered from Germany is about

to be shipped and we have had to decide on one place or another.

We three brothers have therefore got together and decided to set up our surfacing workshop in

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Seville, given that it is definitely the best city in Spain for these specialties, bearing in mind

current circumstances and those of the future. (…)”

Just two years later, Indo moved to Barcelona, where it began making its own optical lenses and

glasses. Right from its early days, it put its ambitious policies of technological and scientific

development into practice, and branches were opened in Seville, Barcelona, Madrid and

Valencia in the 1940s.

In the 1950s Indo took major steps to develop its business. The first industrial buildings were

built in Hospitalet for the production of reinforcements and sunglasses and manufacture of the

first melted-glass bifocals was begun. The first steps in exporting were one of the great

challenges of the time, and the initial steps in melting optical glass were taken.

In the 1960s they experienced major growth in all fields of ophthalmic optics and technological

development. It opened an office in Bilbao and branches in Zaragoza, La Coruña and the Canary

Islands, and began to decentralize production prior to becoming a multinational.

The company continued to achieve new milestones in the 1980s and a major event took place in

September 1987: it was listed on the stock market.

In the 1990s Indo began to open facilities outside Europe, starting with two centres in Morocco.

The company’s decisive policy of continuous renewal, in keeping with the requirements of

maximum competitiveness, was implemented in the 1990s in the form of a strategic plan that

transformed its traditional organizational structure (focused on job functions) into a more

effective, more operative system based on business areas.

In this study the focus is upon the relationship of Indo with its main foreign distributor in France,

because France is an important distribution point for Indo and also, this relationship with this

distributor has a different particularity than the normal partnering manufacturer-distributor. Indo

is exporting glasses and sunglasses for almost 20 years in France, but the relationship with this

foreign distributor started in 2002 with an exclusivity contract. This agreement is a bilateral

distribution contract, which means that Indo is exporting and commercializing its glasses through

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this distributor in France, and in the same way, the French distributor is exporting and

commercializing its products through Indo in Spain.

In the case of Indo International, the relationship between the producer and its foreign distributor

lasts for more than 7 years and it is based on an explicit contract of exclusivity and

confidentiality. It is an interesting relationship because both of the partners are playing both roles

of producers and distributors, and this can be possible only with a very serious contract and also

with trust and commitment from both parts. This can happen because there is no competition

between the partner’s products on both markets, so both are commercializing glasses and

sunglasses by different brands. It shows that the experience in years and annual income is also

helping this relationship by increasing the mutual benefits and by making the partners willing to

continue this agreement and reaching all objectives. There is a mutual understanding of rights

and obligations of each partner and also honesty in dealing with all the problems that appear,

which has improved the communication and indirectly the trust of the partners. Obtaining trust

and commitment during this relationship, Indo has improved the level of cooperation with its

foreign distributor which has increased the sales and to an extent the income. If hypothetically

the foreign distributor would change his behaviour towards the manufacturer, considering

financial problems, low income and objectives, low interest in distributing the goods exported, in

that case the decision maker would consider contracting a new distributor.

Considering the quality of the relationship between Indo and its French distributor, this has

increased in time due to a good process of accumulating experience, exchanging information

about the companies and the market as well as maintaining a good communication. The

information coming from the foreign distributor keeps the manufacturer informed about the

changes that occur in the foreign market, and the exchange is made through internet, continuous

communication, meetings and trade fares. The manufacturer can obtain information from the

data bases, internet, trade fares, magazines and monthly reports from the distributor with what

type of products are better selling in France. The communication is a very important aspect of

this manufacturer-distributor relationship and is continuous through calls, emails, meetings, trade

fares and information exchange. Considering the importance of communication and information

exchange, the decision maker affirms that these two variables have made possible an increase of

trust between Indo and its foreign distributor.

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The existence of trust between the partners has increased the commitment in the relationship as

the informant affirms, and also the trust and commitment are increasing the level of performance

and satisfaction of the manufacturer as the international sales director affirms “you have to feel

that your partner wants to help you maximize your sales and also to be in service for your

company”. This relationship is evolving in the right direction because the partners are open to

each other’s request and opinions as long as the objectives are fulfilled. Indo wants to continue

the relationship with this distributor in the future and they are acting towards a better efficiency

and benefit for both partners.

Considering the level of cooperation, the decision maker thinks that partners should always put

effort in building a strong relationship based on trust and commitment because “a better

cooperation improves the number of sales”. Also cooperation means that the firms are trying to

reach all the objectives and promises they have made to their partners, which improves the trust

and commitment between them.

Referring to the cultural and economical differences between countries, the international sales

director affirms that France didn’t raise any problems because the culture is pretty similar, but

normally there are difficulties in countries that are outside of Europe, like China for example. In

the same time the fast changes in the foreign market are a problem, because the sector of glasses

is a sector with nonstop changes. Indo can prepare the collection for the next season by studying

the sales reports on every month and this together with the information they get from the foreign

distributor and internet, they can prepare for this rapid changes that appear in a foreign market.

B. Case Carpyen

Antonio Carpenter and Encarnacion Celdrán founded Carpyen as a family business in 1954. In

the beginning the company was dedicated to the accomplishment of forged iron feet and screens

for lamps, illumination elements that then satisfied the needs within the national Spanish market

in that time. The first landmark of design of the company appears in 1969: the Lysande lamp, a

creation of Carles M. Serra and first lamp that used halogen like light source in the panorama of

Spain.

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In 1972 Roberto Carpenter, with ideas of a young industrialist and being focus on the needs of

the Spanish market, built the bases of the company at present. Supporting the new plans of

production in the rigorous standards of quality that always had been the philosophy of this

business, Carpyen opened to a new market as a brand new business type with the help of only 20

employees. This form of business was new to Spain after 70 years and represented the

collaboration with external professional designers. These designers, like Pasqual Salvador or

Gabriel Teixidó, identify themselves totally with the objectives of Carpyen and work closely

with their department of production, but at the same time they always contribute as fresh and

renewed vision of the world of the illumination. These designers are professionals of the

industrial design recognized internationally, and also are able to maintain the aesthetic spirit of

the different collections and to place the name of the models of each lamp over his own. With a

catalogue that renews and brings substantial contributions year after year, the company begun to

conquer the national market and also they impose their own style that contributes in creating

important new features from the point of view of the design.

In 1973 Carpyen created the Llagosta lamp, the first halogen lamp of wharves that is known in

the professional lamp industry. In 1987 Edmon González designed a lamp with a halogen light

bulb and blue or pink white crystal. This design will become imitated over and over again, and

that is still use effectively in our days.

In 1989 Gabriel Teixidó designed the Aladina lamp, articulated with one or two arms and

realised in aluminium hard anodizing: another landmark of the illumination of our country. It is

indeed the principle of the decade of the 1980 when Carpyen considers his first commercial law

actions outside our borders, presenting its products in the specialized fairs of Milan, Cologne and

Valencia. During those years they began to realise the first export that will culminate in the

present international recognition of the company. With the purpose of taking advantage of the

joint image of the incipient Spanish design, Carpyen participated in 1979 in the creation of the

Barcelona group and in 1982 in the creation of SIDI, which served as platform in the European

international fairs. In 1994, the Galilea lamp, a design of Pasqual Salvador, obtained the prize

Delta of Silver.

45

In 1997 the same award is granted to the Hi-Fi lamp created by Gabriel Teixidó, which means an

implicit recognition to the philosophy of the company, which is showed in its catalogue:

products with a high aesthetic quality and prices for the reach of all. This same philosophy has

allowed Carpyen to establish a dynamic politics of export that reaches the European continent in

its totality, as well as other countries of other orbits like the United States, Canada, Japan,

Taiwan and a long list of others, a total of 60 countries with a percentage of 40% of its total

income. In all these cases there was serious work to surpass the technical norms that, for some

markets, are especially rigorous.

At present, products like the Galilea, the Pascualina or the Subject are design lamps requested by

their name and comprise of the showcase of the Spanish design. Today Carpyen works with a

catalogue that renews every two years with an absolutely coherent product image. This

production is realised with the present technologies in the matter of sources of illumination, well-

known and appreciated in different markets, which was started by Carpyen as a perspective of

superb cradles in the contemporary design, the correct relation quality-price and a precise and

effective service to its clients.

In this study the focus is upon the relationship of Carpyen with its main distributor in France,

because this is one of the most important distributors for the company. Carpyen is exporting

lamps for 25 years in France, but the relationship with this particular foreign distributor has

started in 2003. This agreement between Carpyen and its current distributor stands without a

contract and brings a total of 10% income of total export income.

Carpyen has the particularity of exporting to a foreign distributor whom is dealing with 4

countries (France, Belgium, The Netherlands and Luxembourg). In this situation and without a

firm contract, Carpyen is distributing its products in four countries dealing with only one

distributor. Although there is never a list of objectives to be reached, the relationship lasts for

more than 6 years and Carpyen owns territorial exclusivity and confidentiality with this

distributor. Another particularity of the relationship with the foreign distributor is that Carpyen

does not have any influence in the price policy that the distributor is adopting. The informant

affirms that the relationship is more satisfactory through a better and often communication

between partners (visits, internet and phone) and that is why there is communication every day

46

between the partners. Through a better communication and a mutual verbal agreement, the trust

and commitment between partners has increased over years, and has improved the satisfactory

results for both firms from very low to very good. The relationship is close between these two

partners that in this case the foreign distributor is actually giving some advice to the producers

considering its products, which the manufacturer is always taking into consideration, because “is

really important to have a good communication at the level of the product” the decision maker

says. Also the firm is protecting its partner by rejecting other distributors that are getting in

contact with the export department. The level of commitment is so evolved in this relationship,

which the producer is trying to protect its foreign distributor and does not think in any way of

contracting a new one.

The particularity of the relationship between Carpyen and its foreign distributor, namely the

verbal agreement and the export to four different countries (The Netherlands, Luxembourg,

Belgium and France) through the same distributor company does not have any negative effects.

Actually the quality of the relationship has increased in time due to a good communication, and

the verbal agreement is strong enough to replace the firm contract and written objectives. There

is not too much information coming from the foreign distributor about the changes that occur in

the foreign market and about the taste of the customers because he wants to keep it hidden from

the manufacturer in case of the search of new distributors, but the contact between the partners is

very important and is made through internet, meetings and trade fares. The lack of a firm

contract makes the foreign distributor acting in secrecy with its manufacturer, being afraid that

more information about its clients would be interesting for his partner in case of change. The

manufacturer can obtain information from the data bases, internet, trade fares and magazines

with what type of products are better selling in France and Benelux (The Netherlands, Belgium

and Luxembourg). The decision maker says that “I always have to have my eyes and my ears

open to what happens in the market, and always to be able to take the temperature of product”.

The communication is a very important aspect of this manufacturer-distributor relationship and is

continuous through calls, emails, meetings and trade fares. Considering the importance of

communication and information exchange, the decision maker affirms that these two variables

have made possible an increase of trust between Carpyen and its distributor.

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The existence of trust between the partners has increased the commitment in the relationship as

the informant said that “there is a total mutual and verbal commitment between the partners”.

Also the trust and commitment are increasing the level of performance and satisfaction of the

manufacturer as the director affirms “trust and commitment has improved the satisfaction from

this relationship from very low to very high”. The decision maker affirms that a good

relationship and the presence of trust and commitment will make the distributor show Carpyen’s

products first to a client, and not of the other manufacturers. But this can be done only with a

high quality product and with a high level of commitment. Although the distributor is not very

transparent towards its manufacturer and there are no objectives to be fulfilled, there is

satisfaction for both of them considering their incomes and Carpyen wants to continue the

relationship with this distributor in the future.

Considering the level of cooperation, the decision maker thinks that trust and commitment are

key factors for developing and keeping it. When talking about cultural and economical

differences between countries, the director affirms that France didn’t raise any problems because

the culture is pretty similar, but the fast changes in the foreign market are a problem, because the

Carpyen is a company that is producing art lamps, and this is a sector with nonstop changes.

C. Case House Diet, SL

House Diet is a mid-size company that began in Spain and developed as a franchise system

offering a service based on the concept of nutritional re-education. The company was founded in

1992 by its current president and founder, originally born in La Rioja, Felix Revuelta, who

viewed it necessary to make people aware of their eating habits. Ever since its inception and

counting 200 employees, the company has not stopped growing, being able to open new centres

in 49 Spanish provinces, in the independent cities of Ceuta and Melilla, and also to extend to

other 17 countries to Europe and America. They have more than 1,270 franchise-holders and 75

shops in the Spanish territory, and nearly 340 centres abroad.

The secret of its success lies in a well-defined professional method that makes it unique in its

sector. The philosophy of House Diet is not only about selling nutritional supplements. The

difference lies in the free, personalized nutritional counseling given in order to achieve the

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desired results, starting with a customized study that is complemented with exclusive products

developed by the House Diet laboratories. By teaching correct nutritional habits, this program

helps reaching the desired objective in reduction and control of weight and once reached the

health weight, and also maintaining it thanks to professionals in dietetic nutrition.

House Diet is the company leader in dietetics and nutrition in Spain, providing specialized

services in this sector with exclusive products of excellent quality, offering a service of 5 stars to

the price of 3, in a sector of constant growth. After initiating in 1999 its international expansion

through a system of franchises, at present, House Diet is present in over 30 countries anywhere

in the world. Over 3 million people have gone to House Diet centres with the aim of reducing

and controlling their weight. The secret: to embosom to eat not to return to fatten thanks to

experts in nutrition and dietetics that, in each of their centres, are personalizing the diets and

giving an exclusive service for each client. The people going to House Diet centres learn to take

consciousness of the advantages of a healthy and balanced diet, as well as of a good food

combination. House Diet doesn’t just sell products, here professionals in nutrition formulate

customized dietetic plans in accordance with special problems of each individual client,

providing them well-being and their desired results.

In 1973, Felix Revuelta, founder of the company, was engaged by an important company of the

dietetic sector to accomplish an economic study. The director of the company proposed to Felix

Revuelta to put in practice his study, and short after the company became very successful. In

1986 after the purchase of company by a multinational, Felix Revuelta sold its stocks and created

a group of companies, group in charge of the franchise network of House Diet. During 1989-

1991 the company has undergone a considerable growth. The group arrives up to 70 employees

with numbers of sale of 5, 5 millions of Euros.

In 1991 the market of dietetic products became liberalized, which causes numerous competitors

entering the market. One year later House Diet opened its first store in Vitoria. The objectives

were to professionalize the sector and to develop a model of an enterprise that could work with

the system of franchise. The store was located in an emblematic zone of the city with several

services: from dietetic products, to massage and beauty products.

49

In 1993 House Diet opened its second store but with a totally different concept: a zone of

average rent and only selling food supplements. In the next year 2 more stores are opened but

they are more close to the current model. In 1997 the group of House Diet and its chain of

franchise began a spectacular grow, based on their own stores and on numerous franchisee. Year

1999 means the first House Diet centre abroad in Portugal.

In 2005 the group extended its international area owning stores in countries like Germany, E. U.,

France, Italy, Greece, Guatemala, Honduras, Mexico, Portugal, Poland and Venezuela. A year

later has received the Prize to the Internationalization granted by the Group Economic Dossier of

Barcelona, and the prize to Emergent Entrepreneur 2006, granted by Ernst& Young and IESE.

In each centre, a certified professional designs a diet plan through a personalized study, and

complements it with exclusive products from the House Diet laboratories, which produce all the

food supplements that its centers work with. In this way, more than two million people have

attained their weight reduction and control objectives, and have reached their healthy weight.

The entire process is supervised weekly through programmed visits with the dietitian. These

weekly meetings are used by the person dieting to give impressions and opinions, to describe any

sort of trouble, or express any doubts that may have risen. On this basis, the dietitian may

consider the need to adapt, correct or adjust the proposed diet. In addition, the dietitian provides

psychological support and motivation in order to allay any feelings of discouragement that may

appear. Moral support is vital, as a motivated person will follow nutritional guidelines correctly

and will persevere in this behaviour.

More than two million people testify to the effectiveness of the House Diet method. The great

secret of the method is the mutual cooperation between the centre’s certified professional and the

person who trusts the company.

House Diet means a personalized diet for each individual which includes some nutritional

supplements. The diet offered by the professional at the House Diet centre is coupled with

natural supplements, of which the main ingredients are plant extracts. The products are definitely

not miracle weight-loss products. House Diet rejects any weight-control formula that is not based

on the strict criteria established by the medical community and supported by international health

50

organizations. Every diet and every nutritional supplements sold by House Diet is designed and

endorsed by the multidisciplinary team of its Technical Department.

In this study the focus is upon the relationship of House Diet with a recently contracted

distributor in South Africa, a distant foreign market. House Diet is exporting food supplements

for only 3 months in South Africa. This agreement between firm B and its distributor has been

based on a contract and for the moment it does not bring any income.

House Diet has just started a relationship of export with a foreign distributor in South Africa for

3 months and in this case we cannot talk about any experience or strong commitment between

the partners. In this situation the contact with the foreign distributor started an year ago, and the

two partners had the chance to know each other and through meetings they started to build some

trust, and through an extent commitment to each other. The fact that the decision makers are

content with the performance and the relational results of this agreement shows that in near

future this relationship will grow strong. Another interesting aspect of this case represents the

South African culture, which was a big impediment at the begging of this relationship.

We cannot talk about the quality of the relationship between House Diet and its South African

distributor, because is a new born relationship, but the manufacturer has developed and

maintains a good communication with its foreign distributor. The information coming from the

distributor keeps the manufacturer informed about the changes that occur in the foreign market,

and the exchange is made through internet, meetings and trade fares. The manufacturer can

obtain information from the data bases, internet, trade fares, magazines and reports from the

distributor with what type of products are better selling in South Africa. The communication is a

very important aspect of this manufacturer-distributor relationship and is continuous through

calls, emails, meetings and trade fares. Considering the importance of communication and

information exchange, the informant affirms that these two variables have made possible an

increase of trust between House Diet and its distributor, especially that the relations have started

a year ago and they had time to work on the trust between partners.

The existence of trust between the partners has developed some commitment in the relationship

although the partnering has just started for a few months. Also the trust and commitment are

51

increasing the level of performance and satisfaction of the manufacturer but only in small

amount considering the incipient state of the relationship. This relationship is evolving in the

right direction because the partners are open to each other’s request and opinions, and they are

both trying to fulfil their objectives.

Considering the level of cooperation, the informant thinks that partners should always put effort

in building a strong relationship based on trust and commitment because usually cooperation

represents a better performance. Also cooperation means that the firms are trying to reach all the

objectives and promises they have made to their partners, which improves the trust and

commitment between them. In this case only 70% of the objectives have been fulfilled by the

foreign distributor, but the manufacturer thinks that is a good start for a new relationship. In

order to built trust and commitment, the manufacturer has tried to help the distributor getting

more familiar with its products for a better distribution.

Referring to the cultural and economical differences between countries, the international sales

director affirms that in South Africa there were problems to start this partnering but not because

of the foreign distributor but because of the government, but in the same way the fast changes in

the foreign market are not a problem in his opinion.

D. Case Kiluva, SL

The firm was formed in 1937 as a family business. The main activity is producing and

commercializing syrup as food supplements. It has started the export activity in 1998 and at

present is exporting in almost 40 countries.

Kiluva was created by Felix Revuelta, and together with the laboratories of Kiluva, he also owns

the magazine Perfect Weight that sells more than one hundred thousand units a year.

At the beginning of the year 2005 Kiluva begins a spectacular diversification of its market. The

first movement is the purchase of 48% of the Heredad Baroja Bodegas, located in Alava, La

Rioja. These warehouses were built in 1964, in the best years of the harvest. Its construction, in

the locality of Elvillar, was due to an important purpose: to obtain from the best grapes of the

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zone the most exquisite wines, but maintaining a traditional spirit within the frame of a modern

warehouse.

The developing of the company begins with the commercialization of young wine (Crianza),

which reaches a volume of sales in the first years around 300,000 litres. At present, Heredad

Baroja Bodegas have been increasing the participation quota of Crianza, Reserve and Great

Reserve wines, until reaching 35% of its production. In addition, it is a well-known wine world-

wide, since the exporting activity represents 50% of its commercial policy. Felix Revuelta,

president of Kiluva, has decided to specialize in the Spanish wine production and to export it to

North America, so for that reason this group has invested almost 4 million € in the purchase of

48% of the Rioja Bodegas.

With this purchase, the medium term objectives are those to create a wine network called

Amicus Felix, in order to franchise it in the future. The first establishment is predicted to be

inaugurated in Santa Eulalia (Ibiza).

In this study the focus is upon the relationship of Kiluva with its main foreign distributor in

Saudi Arabia, another geographically and culturally distant country. This partnership has the

particularity of a long relationship but without any trust and commitment taking place between

the partners. The relationship takes place for the past 10 years, while the manufacturer is

exporting herbal syrup to Saudi Arabia. This agreement between Kiluva and its distributor it is

based on a contract and brings a very small income.

Considering this manufacturer, we can say there is a different type of relationship in comparison

with the other three firms. Although Kiluva has an agreement for 10 years with its distributor in

Saudi Arabia and a firm contract the decision maker is affirming that, during all this time, they

could not accumulate any experience with this foreign distributor or put the base of mutual trust.

The communication between partners is reduced and although the relationship brings some

mutual benefits, it cannot be taken into consideration relational commitment. “Perception of

quality is different in Saudi Arabia” says the decision maker, and also the relationships between

partners firms don’t have the same particularity like in Europe, so we cannot talk about trust and

commitment increasing the level of performance and satisfaction of both partners. Also

53

developing a contact in this country was very difficult because of the very big difference

between culture and religion, but building a relationship is even harder even after 10 years of

doing business. The decision maker affirms that although his firm has tried to improve this

agreement in time, they would change to a different distributor as fast as possible if it wouldn’t

be so hard to find another one and the conditions would be different.

Considering the quality of the relationship between Kiluva and its Saudi Arabian distributor, this

has not increased in time due to a process of accumulating experience, because the exchange of

information about the companies and the market is minimum as well as the communication. The

manufacturer has a firm contract and also is preparing objectives every month for the foreign

distributor but these are not very well fulfilled. Although there is a frequent contact between the

partners, Kiluva has not accumulated any experience with its foreign distributor. There is no

information coming from the foreign distributor to keep the manufacturer informed about the

changes that occur in the foreign market, but the exchange is made through internet, meetings

and trade fares. The manufacturer can obtain information from the data bases, internet, trade

fares and magazines. The communication is a very important aspect of this manufacturer-

distributor relationship and is continuous through calls, emails, meetings and trade fares.

Considering the importance of communication and information exchange, the informant affirms

that the lack of these two variables has not made possible an increase of trust between the

partners.

Trust does not exist in this partnership, so we cannot say there is commitment between Kiluva

and its Saudi Arabian distributor. In this case the level of performance and satisfaction of the

manufacturer is very low, as the informant affirms “there is no interest on the other side to

improve this relationship and this can be seen in sales objectives”. This relationship is not

evolving at all in the right direction, because the distributor is not open to its manufacturer and

he is not interested in improving the sales for its partner, which would benefit the both of them.

Considering the level of cooperation, as well as the level of satisfaction and performance, they

have not known the slightest growth in the last period of time and they would change the

distributor as soon as possible if the relations with Saudi Arabia would be different and it would

be easier to export there.

54

Referring to the cultural and economical differences between countries, the informant affirms

that Saudi Arabia has raised a lot of problems because the culture is completely different. At the

beginning to start the relations with this country and foreign distributor was not so difficult, but

to develop this relations was extremely difficult, and almost impossible. In the same time the fast

changes in the foreign market are a problem and only by getting from internet they can prepare

for these rapid changes that appear in a foreign market.

Table 4. Firm characteristics

Firm Size Sector Exporting

experience

Relationship with

the distributor

Indo

International

SL

Large firm (1600

employees)

Ophthalmic lenses

and equipment

30 years

experience 7 years

Carpyen SL Small firm (20

employees) Illumination

31 years

experience 6 years

House Diet SL Small firm (200

employees) Dietary

10 years

experience < 1 year

Kiluva SL Small firm (70

employees) Food and beverages

11 years

experience 10 years

5.1 Cross case analysis

For all the four cases that are presented here, the importance of trust and commitment as

principal elements in the relationship between manufacturers and their distributors were carefully

analyzed in order to test the eight research questions as well as to compare the findings from

each case.

Communication is the key variable for a business relation, without it there cannot be trust or

commitment between partners. Communication fosters trust by assisting in resolving disputes

and aligning perceptions and expectations, and in the same way the accumulation of trust leads to

55

better communication (Moorman, Desbpande and Zaltman, 1993). The level of communication

is very highly valued between Indo, Carpyen and Kiluva and their foreign distributors, being one

of the precursors of trust. In this relationship, communication represents not only a way of

exchanging information, but also dealing with problems.

Information exchange is another antecedent of trust and commitment, a variable that greatly

influences a relationship between partners. The level of information exchange is very highly

valued between Indo, Carpyen, House Diet and their foreign distributors, and together with

communication is helping building trust between partners. Considering the importance of

communication and information exchange, the informants affirm that these two variables have

made possible an increase of trust between Indo, Carpyen, Kiluva and their distributors.

In that case P1 is confirmed for Indo, Carpyen and House Diet as previously stated in several

studies by Dwyer, Schurr and Oh (1987), Anderson and Weitz (1989), Anderson and Narus

(1990), Moorman, Deshpande and Zaltman (1993), where they prove that information exchange

aligns partners’ expectations and perceptions, and communication between parties has an

influence on the development of trust in a relationship. Bordonaba-Juste and Pollo-Redondo

(2004) support also the fact that information exchange has a large positive relation with trust.

Therefore P1 confirms that communication and information exchange help partners to share

information and resources, which will go to the increasing of trust between them.

Indo, Carpyen and House Diet confirmed that there is a direct connection between trust and

commitment, that the existence of trust between the partners has increased the commitment in

the relationship. This means that if there is trust in a relationship, commitment will fallow

because committing to a partner entails vulnerability, so the parties will seek only trustworthy

partners. In this case P2 is confirmed for Indo, Carpyen and House Diet and a direct connection

between trust and commitment has been often proved before in the studies of Andaleeb (1996);

Moorman, Zaltman, and Deshpande (1992) and Morgan and Hunt (1994). Morgan and Hunt

(1994) affirm that trust is a major determinant of relationship commitment because commitment

entails vulnerability and the parties will seek only trustworthy partners. In the same way,

Siguaw, Simpson and Baker (1998) propose that the distributor's trust in the supplier will

influence its commitment to the relationship with the supplier, because they believe that

56

commitment to a relationship would not be established without a foundation of trust in place.

Morgan and Hunt (1994) and Bordonaba-Juste and Pollo-Redondo (2004) support also the fact

that increasing trust is associated with greater commitment.

For the last firm the informant says that trust does not exist in this partnership, so we cannot say

there is commitment between Kiluva and its Saudi Arabian distributor. In this case, the fact that

P2 was not confirmed for Kiluva only strengthens the construct, because if there is no trust there

can’t be any commitment. Bordonaba-Juste and Pollo-Redondo (2004) show that both trust and

commitment are essential ingredients for a channel member to feel long-term oriented. In this

context, trust is necessary to make both parties sure that the profits of the relationship will be

distributed in a fair way, even in contingencies which are not established in the franchising

contract. On the other hand, when both parties are committed it will be necessary to make the

relationship continue in the long-run in order to increase the value of the investment.

During the exchange process, the manufacturers’ trust in the distributor and vice versa, increases

the security of the manufacturers/distributors that his partner’s actions will have positive results,

which produces a greater mutual satisfaction. Also, in the same way commitment helps

improving mutual satisfaction by believing that positive results can repeat themselves through

good relationship. All of the three firms are supporting the fact that the higher the level of trust

and commitment, the higher the level of satisfaction in the relationship.

Considering P3 which refers of the level of trust and commitment that can increase or not the

level of mutual satisfaction, the proposition has been confirmed for the first three companies

Indo, Carpyen and House Diet but totally rejected for Kiluva. The confirmation of P3 is

according with the affirmations of Dyer and Oh (1987) and Mohr and Spekman (1994), which

say that during an exchange process, trust and commitment in between partners increases the

security of each partner in their actions, and the positive results of their exchange. For Carpyen

the level of trust and commitment has increased its satisfaction from the existing relationship

with the foreign distributor from very low to very high. Morgan and Hunt (1994) affirm that

firms that receive superior benefits from their partnership, on dimensions like product

profitability, customer satisfaction and product performance, will be more committed to the

relationship.

57

P4 is supported by Indo, Carpyen and House Diet, but totally rejected by Kiluva. Kiluva does not

have a normal relationship with its distributor because of the differences of culture between the

partners. Although in time, Kiluva has tried to improve the exchange process, there were no

results of a better relationship between the partners, so no trust and commitment has been built

(P1 and P2), therefore there is no increase of the level of satisfaction (P3) and level of

performance (P4). Also for case House Diet the proposition is only partly confirmed because the

level of performance increases mostly when the relationship is very active (for example during

visits and inspections).

A relationship between partners means taking into consideration a long-term result of the

relationship and also an interest in mutual performance for each partner, not only for one of

them. Therefore relational commitment has a positive influence on a higher level of

performance. In the same way, if a manufacturer trusts in his distributor and vice versa, they will

not perform actions that will have a negative outcome for their firm or their partner’s firm and

they will serve the partner’s interest as well as their own. In this sense, with trust, partners can

behave in a more efficient manner, and therefore relationship performance is improved

(Dahlstrom and Nygaard, 1995) and in the same time with an increase of commitment in their

relationship, it is frequently believed a result of a higher performance level (Stern and El-Ansary

1990; Blankemburg, Eriksson and Johanson, 1996; Heide and Stump, 1995). Indo, Carpyen and

House Diet are supporting the fact that the higher the level of trust and commitment, the higher

the level of performance in the relationship, so P4 is supported in this case by the first three

firms.

Trust has the same effect on satisfaction and performance in both perspectives (Bordonaba-Juste

and Pollo-Redondo, 2004). In this respect, when there is trust between partners, both parties are

sure that their partners will work more efficiently, increasing their profits and satisfaction. Also

commitment is an essential element for relationship success, since manufacturers consider it as

the key to obtain high value results.

In relation with P5, the influence of partners’ mutual trust and commitment over the level of

cooperation, all the cases are partly supporting it. Cases Indo, Carpyen, House Diet and Kiluva

are partly supporting P5, showing that a higher level of mutual trust and commitment between

58

partners means only a higher level of cooperation. Considering this variable, all of the firms are

supporting the fact that a higher level of trust and commitment means a higher level of

cooperation. Anderson and Narus (1990) affirm that cooperation is an outcome that is directly

influenced by both trust and commitment, because a partner committed to a relationship will

cooperate with another member because of trust and because of the desire to make the

relationship work. This is supported by Morgan and Hunt (1994), their results showing that

relationship commitment and trust have a considerable influence cooperation, important variable

for relationship marketing success.

Referring to P6, only two cases (Indo and Carpyen) are supporting it considering the influence of

psychic distance over communication and information exchange, as previously suggested by

scholars like Johanson and Valhne (1990): “psychic distance is defined in terms of factors such

as differences in language, culture, ... which disturb the flow of information between the firm and

the market”. The relationship with the foreign partner can sometimes suffer of a breakdown in

communication which can be caused by distortions in the information transmission process and a

decreasing of the frequency of information exchange between trading partners, which occurs

because of cultural boundaries (Mohr and Nevin, 1990). Bello et al. (2003) affirms that the

perceived psychic distance of a foreign market does not affect the strength of the ties that bind

the trading partners.

Cases House Diet and Kiluva are rejecting P6, showing that in some countries the cultural

differences are affecting a great deal the relationships of foreign companies with their partners,

especially the exchange of information between firms and the communication.

Considering P7, three of the companies (Indo, Carpyen and Kiluva) are supporting the fact that

uncertainty, the rapid changes in the foreign market can influence the cooperation between firms

in two different ways, either getting a closer relationship between partners or to reduce the

reliance on each other. Scott (1987) notes that uncertainty has been found to imply both tight and

loose couplings between decision-making units. This refers to the fact that a foreign market

changes rapidly and permits the manufacturer to be caught by surprise (Klein et al., 1990) and to

the extent that volatile foreign market conditions may either motivate the parties to engage in

close cooperative actions to respond more effectively to change or it may lead the parties to

59

reduce their reliance on each other as they retain flexible channel policies in the face of rapid

change (Scott, 1987; Achrol et al., 1983). The third firm House Diet is not supporting this influence of

foreign market volatility over its relationship with their distributor.

Bello et al. (2003) affirm that it is important for the manufacturer to do a thorough assessment of

whether or not it has adequate resources before attempting to sell overseas. Even if the

manufacturer is perfectly equipped to handle the problems of the domestic market, this does not

guarantee that it’s financial and human resources are appropriate for international expansion

(Bello and Lothia, 1995). The inadequacy of resources would hinder its chance of accurately

understanding the foreign market and of supporting its products and its foreign-based distributor.

The manufacturer should also attempt to assess the degree to which the foreign market is

volatile.

Firm Indo, Carpyen and Kiluva perceive that the bigger the cultural differences between partners

the bigger the possibility of rapid changes in the foreign market that can surprise the producer.

So cases Indo, Carpyen and Kiluva are supporting P8, and House Diet is rejecting the

proposition. As Klein and Roth (1990) stated before, foreign countries with very different

cultures, customs, and business practices can create uncertainty and pose serious problems for

manufacturers, as they attempt to develop and maintain channel relationships with foreign-based

intermediaries. Likewise, foreign countries with very different cultures, customs, and business

practices can create uncertainty and pose serious problems for manufacturers, as they attempt to

develop and maintain channel relationships with foreign-based intermediaries (Klein and Roth,

1990).

Cases Indo, Carpyen and House Diet are supporting what Morgan and Hunt (1994) have stated

before and which is that presence of commitment and trust is central to successful relationship

marketing. A relationship between two partners is based on trust and commitment in order to last

in time, but first of all as Anderson and Weitz (1989); Anderson and Narus (1990); Moorman,

Zaltman, and Deshpande (1992); Dyer, Schurr and Oh (1987) and Geykens, Steenkamp and

Kumar (1998) have found in their studies, communication and information exchange have an

influence on the development of the trust in a relationship, which then implies commitment. The

relationship of firms Indo, Carpyen and House Diet with their foreign distributors has behind

60

years of experience and relationship benefits for both parts. The trust and commitment was built

in time with a good communication and understanding of each part, supported by visits and

planes of improving. The outcome of this relationship based on trust and commitment is a more

efficient behaviour in a long period of time which improves performance (Dahlstrom and

Nyagaard, 1995), and an increase of the security of the partners which improves each partner’s

satisfaction and cooperation (Anderson and Narus, 1990).

Kiluva is rejecting almost all of the propositions, but in this case we are dealing with a

relationship with a distributor from Saudi Arabia. Although this partnering has had years of

exchange behind them, because of the culture and religion it was impossible to accumulate

experience in time in order to build trust and commitment. This also proves a relationship must

evolve through communication and information exchange in order to become satisfactory for

both partners.

In other words, summarizing the most important factors of trust and commitment relationship we

can say without communication and information exchange, which means experience in time

between partners, there cannot be trust and commitment as the decision makers have stated it by

themselves. An agreement between companies based on trust and commitment means generally

an increase in satisfaction and performance of each partner, a better cooperation and relational

results. For the producers dealing with foreign distributors there is always the case of the

differences of culture, which can affect the relationship between firms: a) in lower rate for the

case when the distributor is a neighbour, is situated in the same continent and has similar culture;

and b) in a higher rate for distributors situated in different continents and with a totally different

culture. Any relationship between foreign partners is always affected by the rapid changes that

appear in each market, especially the case of the producer which has to always predict the

movements of the foreign market.

61

Table 5. Results of cross-case analysis

Variables Firms

Indo Carpyen House Diet Kiluva

Antecedents

Communication High level of

communication

High level of

communication

High level of

communication

A very low level of

communication

Information

exchange

High rate of information

exchange

High rate of information

exchange

High rate of information

exchange

A very low rate of

information exchange

Relationship

benefits

Relationship based on

acquiring superior

benefits

Relationship based on

acquiring superior

benefits

Relationship based on

acquiring superior

benefits

Inferior benefits obtained

from this relationship

Mediating

variables

Trust High level of trust

between partners

High level of trust

between partners

Medium level of trust

between partners

Low level of trust

between partners

Commitment A high level of trust

entails the appearance and

development of

commitment

A high level of trust

entails the appearance and

development of

commitment

A high level of trust

entails the appearance and

development of

commitment

A low level of trust

doesn’t help for

developing commitment

between partners

Outcomes

Performance Trust and commitment Trust and commitment Trust and commitment in The lack of trust and

62

entail a high level of

performance

entail a high level of

performance

a new relationship entail

a medium level of

performance

commitment entails a low

level of performance.

Satisfaction Trust and commitment

entail a high level of

satisfaction

Trust and commitment

entail a high level of

satisfaction

Trust and commitment in

a new relationship entail

a medium level of

satisfaction

The lack of trust and

commitment entails a low

level of performance.

Cooperation High level of cooperation

based on trust and

commitment

High level of cooperation

based on trust and

commitment

High level of cooperation

based on trust and

commitment

Medium level of

cooperation

Foreign market

characteristics

Foreign market

volatility

Rapid changes in foreign

markets are influencing

cooperation between

firms

Rapid changes in foreign

markets are influencing

cooperation between

firms

Rapid changes in foreign

markets are influencing

cooperation between firms

There is no influence of

the rapid changes over

international partnering

Psychic distance Cultural differences are

not affecting an

international partnering

(especially for similar

cultures)

Cultural differences are

not affecting an

international partnering

(especially for similar

cultures)

Cultural differences are

affecting a great deal an

international partnering

(very different cultures)

Cultural differences are

affecting a great deal an

international partnering

(very different cultures)

63

6. Conclusions, Implications, Limitations and Further research

In this study we explore the nature of relationship marketing, which refers to all the

marketing activities directed toward establishing, developing, and maintain successful

relational exchanges. The need for relationship marketing stems from the changing

dynamics of the global marketplace and the changing requirements for competitive

success (Morgan and Hunt, 1994). But today to be an effective competitor in the

international marketplace requires being an effective co-operator in some network of

organizations. The commitment-trust theory supports the fact that those networks

characterized by relationship commitment and trust engender cooperation which

engender success of inter-firm relationships in the international distribution system. If

commitment and trust are key variables this means they have to be developed and this

can be done by providing resources, opportunities and benefits that are superior to the

offerings of alternative partners; by maintaining high standards of corporate values

and allying oneself with exchange partners having similar values; by communicating

valuable information, including expectations, market intelligence, and evaluations of

the partner’s performance; and by avoiding malevolently taking advantage of their

exchange partners. Some of the actions will enable firms and their networks to enjoy

sustainable competitive advantages over their rivals and their networks in the global

marketplace (Morgan and Hunt, 1994). The main strategic implication for relationship

between partners can be summarized in the idea that both trust and commitment are

key mediating variables between certain behaviours (communication and exchange of

useful and quality information) and for the maintenance of the success of the

relationship with their distributors (cooperation, satisfaction and performance).

This study is focused on the nature of relationship in the international market and on

two key characteristics: trust and commitment, known to be associated with the

effective cooperation that is most important for relationship marketing success. The

study starts with a literature review which includes: internationalization and the

Uppsala internationalization model; transaction cost approach; the nature of

relationship marketing; the commitment-trust theory and the key mediating variable

(KMV) model; continues with an adopted conceptual framework that includes a

model based on relationship commitment and trust; followed by case selection,

individual case analysis and cross-case analysis.

64

From an academic point of view, and considering the need of research on

internationalisation in Europe, this study provides an insight into the relationship

between a producer and its foreign distributor, and how trust and commitment are

influencing this relationship. Based on the literature review, the study proposed and

tested eight propositions, thus confirming various findings from the previous research

on similar topics.

Consequently, the adoption of principles which relationship marketing proposes has

important strategic implications for both the manufacturers and their distributors.

Thus, both parties have to direct themselves to the creation and transfer of value to the

partner, with the presence of commitment and trust between the parties being

necessary for the partnering relationship to be successful.

The research brings a contribution to practitioners. The empirical findings show that a

business relationship is based on trust and commitment which is influencing the

cooperation between partners, as well as mutual performance and mutual satisfaction.

Decision makers resist short-term pursuits of higher profits and behave in favour of

long-term benefits of staying with the existing partner, or even are protecting their

partners in case they are contacted by different distributors, showing that will not act

opportunistically. Decision makers have to be prudent and surpass all the cultural

differences and all the sudden changes that can characterize a foreign market.

Regarding the limitations of the study, given its qualitative nature, we cannot

statistically generalize the results, therefore, we cannot extrapolate the empirical

results and conclusion to a bigger population than the one included in the sample.

Further studies should be carried out in a variety of industrial and national contexts,

utilising both qualitative as well as quantitative methodologies, in order to identify if

the presence of trust and commitment is central to successful relationship marketing.

Given the fact that this research is focused on commitment and trust, which leads

directly to cooperative behaviours that are conducive to relationship marketing, future

research should try to investigating the direct influence of relational benefits over

trust, commitment and partners’ satisfaction. In his study the most important

antecedents of trust and commitment are information exchange and communication.

Therefore, it would be interesting for further examination to check if there are any

other important antecedents that can influence a partnership. Additionally, future

65

research should also investigate the influence of the human relationships over the

partnership of firms, and over trust and commitment.

66

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Annex 1: Modelo de entrevista

1. Vamos a comenzar con unas breves preguntas descriptivas de su empresa:

1.1 ¿Quién y cuándo fundó la empresa? ¿Es una empresa familiar?

1.2 Actividad principal de su empresa:

1.3 Años de experiencia de su empresa en el sector principal:

1.4 ¿Años de experiencia de su empresa como exportadora ¿Cuándo y por qué se

empezó a exportar?

1.5 Número de países / zonas geográficas a los que exporta su empresa en la

actualidad (por orden de importancia):

1.6 ¿Productos (o líneas de productos) exportados?

1.7 Porcentaje que supone la exportación sobre el total de ventas:

1.8 Número de trabajadores a tiempo completo de su empresa:

1.9 En total, el número de empleados a tiempo completo dedicados en su empresa a

actividades de exportación:

1.10 ¿En general, la disponibilidad de recursos financieros (y/o de otro tipo como

productivos, logísticas, etc.) de su empresa para ser utilizados en las actividades de

exportación es adecuada?

2. A continuación, permítanos, preguntarle por Usted y su experiencia:

2.1 Cargo que Usted actualmente desempeña:

2.2 Sexo / Edad:

2.3 Número de años que Usted lleva trabajando en su actual empresa:

2.4 Número de años en los que lleva desempeñando su actual cargo:

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2.5 Número de años que Usted tiene de experiencia en el sector:

2.6 Número de años de experiencia en actividades de exportación:

2.7 Nivel de formación, título académico:

3. Determinar situaciones concretas de la relación fabricante exportador-

distribuidor en un determinado país extranjero

Entre las distintas formas de internacionalización, nuestro estudio se centra

concretamente en la exportación a través de un canal de exportación ajeno

(distribuidor/importador/comisionista en el extranjero) versus una alternativa propia

(oficina comercial, filial/subsidiaria de ventas) de un producto específico o línea de

productos específica a un mercado extranjero concreto. Por este motivo, le rogamos

que no conteste a las preguntas en general, sino pensando siempre en una relación con

un distribuidor extranjero en concreto.

Para su elección, le pedimos que piense en un distribuidor de primer nivel de

importancia (es decir, el principal en cuanto a volumen de ventas y/o interés

estratégico de export) con el que mantenga una relación frecuente. Por favor, conteste

a todas las preguntas refiriéndose siempre a la relación con ese

distribuidor/importador en concreto.

3.1 Producto específico, o línea de productos, al que se va a referir:

3.2 País concreto en el que realiza su actividad el distribuidor:

3.3 Número de años que su empresa lleva exportando a dicho país:

3.4 Número de años de relación con el distribuidor en ese mercado:

3.5 Porcentaje aproximado del volumen de ventas realizado a través del distribuidor

(para el producto-país analizado):

4. Sobre las características de la relación con el distribuidor extranjero: ¿Qué

caracteriza el tipo de relaciones que mantiene con el distribuidor extranjero en cuanto

a:

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formulación y cumplimiento de objetivos,

grado de formalización del acuerdo de distribución internacional,

exclusividad territorial o de otro tipo,

confidencialidad,

seguimiento o supervisión en la actuación,

frecuencia y calidad de contacto, interactuación, etc.

5. Valore la calidad de la relación que mantiene con el distribuidor extranjero

elegido en torno a aspectos tales como:

experiencia acumulada con el distribuidor,

uso de las TICs (Internet, etc.) en la relación,

obtención y procesamiento de información relevante

la innovación (en producto y/o proceso) necesaria para atender mejor ese

mercado exterior,

¿En qué medida los cambios tan rápidos en el mercado extranjero elegido están

afectando la competencia y la relación de cooperación con este distribuidor? etc.

6. Respecto a la información que necesaria para gestionar la relación de

exportación considerada, por favor, indique qué tipo de información

proporcionable o no por el distribuidor valora y/o requiere especialmente y para

qué se utiliza dicha información en su compañía?

Fuentes de información sobre el mercado exterior en concreto

Obtención y procesamiento de la información relevante (sobre el mercado, los

competidores, los clientes, etc.)

7. Sobre el proceso de comunicación entre el fabricante-exportador y el

distribuidor extranjero elegido:

¿Qué tipo de acceso a canales de comunicación mantiene con el distribuidor

extranjero?

¿Cómo se recoge la información relevante del mercado?

¿Existieron dificultades en establecer y/o desarrollar contactos en dicho país

debido a las diferencias culturales socio-políticas, económicas, legales, entre el

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país de origen y el mercado de exportación? Si es así, ¿cómo se afrontaron y por

qué? ¿Afectan dichas diferencias a la relación de comunicación e intercambio

de información con el actual socio comercial (distribuidor extranjero)?

La comunicación y el intercambio de información, ¿Ha incrementado la

confianza entre los socios (fabricante exportador-distribuidor en el país

extranjero)?

8. En las relaciones con dicho distribuidor extranjero, cómo se concibe y cómo se

genera el compromiso, la confianza y el mantenimiento de la reputación entre

ambas partes (la suya como fabricante-exportador y el distribuidor)?

¿La generación de confianza entre los socios ha aumentado el compromiso

mutuo? Si es así, ¿cómo?

¿El nivel de confianza y de compromiso entre el fabricante y el distribuidor

extranjero contribuye a aumentar el nivel de satisfacción mutua? ¿En qué

medida y por qué?

¿El nivel de confianza y de compromiso entre el fabricante y el distribuidor

extranjero favorece un mayor nivel de funcionamiento y entendimiento mutuo?

¿El nivel de confianza y de compromiso entre el fabricante y el distribuidor

extranjero aumenta el nivel de cooperación y/o de competencia?

9. ¿Qué medidas se han tomado para construir confianza y compromiso entre los

socios?

10. ¿Está usted satisfecho de su relación con su distribuidor?

¿Se cumplen las promesas hacia el distribuidor y cree usted que es lo mismo

de parte de su socio?

¿En qué posibles circunstancias se plantearía el remplazo de su socio?

¿Qué dificultades usted encuentre habitual en el manejo de la relación con el

socio citado?

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11. Rendimiento de la relación con el fabricante exportador/distribuidor extranjero Por favor, refiriéndose a la mayoría de las operaciones realizadas con el distribuidor elegido, indique en qué grado está de acuerdo con las siguientes afirmaciones (1-Muy en desacuerdo, 5-Muy de acuerdo)

1 2 3 4 5

Han sido muy rentables

Han generado un gran volumen de ventas

Han conseguido un rápido crecimiento

Han mejorado nuestra competitividad global

Han incrementado el nivel de cooperación con el distribuidor

Han incrementado de forma significativa nuestra cuota de mercado

Han sido muy satisfactorias y/o exitosas

Han incrementado la confianza en el distribuidor

Han alcanzado completamente nuestras expectativas