Learn to be good or bad? Revisited observer effects of punishment: curvilinear relationship and network contingencies

Abstract

Purpose Although supplier-initiated punishment is widely used to manage distributors’ opportunism, its spillover effect on unpunished distributors (i.e. observers) within the same distribution network remains under-researched. Specifically, this paper aims to investigate the curvilinear effect of punishment severity on an observer’s opportunism, and how such an effect is contingent on the observer’s network position. Design/methodology/approach This paper uses regression analysis with survey data gathered from 218 distributors in China’s automobile industry. Findings Punishment severity has an inverted U-shaped effect on the observers’ opportunism, and such effect is weakened by both the observers’ network centrality and their degree of dependence on the supplier. Practical implications The findings should encourage suppliers to focus more on the spillover effects of punishment on observers. To this end, the supplier must deliberately initiate the appropriate level of punishment severity against its distributors because an inappropriate level of punishment severity (e.g. too lenient) may unexpectedly raise the unpunished observers’ level of opportunism. Moreover, the supplier should be fully aware that observers’ specific network positions may produce varying spillover effects of the punishment. Originality/value This study enriches the literature on channel governance by revealing the curvilinear mechanism through which punishment severity influences observers’ opportunism. By applying social learning theory to channel punishment research, this study unveils both the inhibitive learning and the imitative learning forces inherent in a single punishment event, and it delineates their joint effect on an observer’s opportunism. In addition, this study outlines the observer’s vertical and horizontal relationships within the distribution network and explores their contingent roles in determining the spillover effects of punishment.

The dilemma of relational embeddedness: mediating roles of influence strategies in managing marketing channel opportunism

“…However, moderate to high levels can reduce opportunism by facilitating coordination. This finding is consistent with recent evidence that punishment severity has an inverted U-shaped effect on a channel observers' opportunism (Xiao et al, 2019). In addition, the frequent use of strong coercive influence strategies produces less negative affect as it rapidly leads to compliance, thus facilitating a change in the relationship from coercion to mutually beneficial exchange (Molm, 1994).…”

“…Second, managers should understand how to use influence strategies to protect channel relationships from opportunism. When applying coercive influence, a high level is required to ensure opportunism is effectively deterred, both for a firm's partners and for channel observers (Xiao et al, 2019). Unlike other research into power in Western cultural contexts (Brown et al, 2009), this study offers evidence that coercive influence can be positive in an exchange relationship.…”

Power Imbalance and the Dark Side of the Captive Agri-food Supplier–Buyer Relationship

“…A dependence power advantage is one of the most cited antecedents of opportunism in the inter-firm relationship literature (Grandinetti, 2017 ; Hawkins et al, 2008 ; Tangpong et al, 2015 ; Wang & Yang, 2013 ). Previous studies had shown that opportunism’s association with other variables could be curvilinear, for example, opportunism and performance (Lado et al, 2008 ), opportunism and goal exceedance (El Meladi et al, 2018 ), opportunism and punishment severity (Xiao et al, 2019 ), and opportunism and guanxi (Shen et al, 2019 ). Drawing on the long-term perspective of Dabholkar et al ( 1994 ) and the relationship development cycle (Dwyer et al, 1987 ), opportunism is expected to be low at the relationship initiation stage but, as the relationship develops and power relations become obvious, the partner or its agent with the higher power could easily use the power advantage to exploit the weaker partner.…”

How does the distributors’ “banding together” affect contract governance in marketing channels?

“…In the current study, the scope lies in the manufacturing sector, specifically a manufacturer’s interaction with its distributors and the related characteristics in the setting of manufacture-distributors (Xiao et al , 2019). The configuration of the setting is shown in Figure 2.…”

“…The other rising paradigm treats the network embeddedness as contingent factors that affect the efficiency of channel behavior (Gao et al , 2015). For instance, Zhang and Guan (2013) proposed that network density strengthens the negative relationship between coercive power exercise and cooperation and the positive relationship between noncoercive power exercise and cooperation in the Chinese business-to-business context; Gao et al (2015) posited that while buyer-supplier relational strength strengthens the positive effect of technological diversity in supplier network on the buyer firm’s new product creativity, supplier network density weakens the relationship; Xiao et al (2019) found that the observer’s network centrality weakens the inverted U-shaped relationship between punishment severity and observer opportunism.…”