Channel relationships with dependence asymmetry, which are especially harmful to partners with dependence disadvantage, abound in developing markets. To help these dependence-disadvantaged parties find feasible solutions for dependence balancing, this study examines network embeddedness and its differential role in enforcing the counterpart's relationship-specific investments (RSIs), thus leading to improved channel performance for both partners. Based on the political economy framework, we posit that a dependence-disadvantaged partner's embeddedness in business and government networks entices its partner to commit more RSIs, which in turn improve its channel performance; conversely, such an effect is weaker for the dependenceadvantaged partner. We also predict that under high dependence asymmetry, a dependence-disadvantaged partner's embeddedness in the business network will exert a smaller effect, but its embeddedness in the government network will exert a larger effect. We collected dyadic survey data of buyer-supplier pairs in consumer product industries in China. In general, the results provide support for our predictions. The findings provide theoretical and managerial implications for partners in asymmetric channel relationships in developing markets.
Keywords Channel relationships . Dependence asymmetry . Network embeddednessAsymmetric buyer-seller relationships, in which one party is more dependent on the other party, abound in developing markets. Examples of such relationships with asymmetric dependence include Apple and its supplier Foxconn in China, Wal-Mart and its numerous suppliers in developing countries, and Toyota and its dealers all over the world. Although the extant research on channel dependence has consistently shown that such relationships are more dysfunctional than symmetric ones and are especially harmful to the more dependent partners (Anderson and Weitz 1989;Gulati and Sytch 2007;Kumar et al. 1995), the mechanisms and strategies firms * Fue Zeng