Influences on the level of export channel integration: a transaction cost analysis

Abstract

The export distribution channel is an integral component of exporting success. Regardless of buyer interest in the product or the exporter's desire to fill that demand, exporters have a low chance of success if distribution arrangements are unable to be coordinated with other marketing activities. This signifies the pivotal role distribution plays in the export marketing effort as a whole. Consequently, a wide variety of channel structures, signifying differing levels of channel integration, have developed to maximise the likelihood of exporting success.

Marketing literature, recognising the importance of the distribution function to the export marketing effort, has devoted much time and effort to interpreting the conditions and nuances under which specific export channel structures have evolved. Among others, Transaction Cost Analysis (TCA) offers a theoretical explanation of forward vertical integration in the export distribution channel. Specifically, previous research has focused on a number of TCA generated constructs, including external uncertainty, product characteristics and transaction specific assets as influencing export channel structure.

While much existing research has investigated the relationship between channel integration influences and export channel structure, such studies have been conducted almost exclusively in environments largely dissimilar to New Zealand in terms of average firm size, capital intensity and local demand conditions. This calls into question the general applicability of such findings in relation to the influences upon the level of channel integration for New Zealand exporters, specifically given the limited range of export channels NZ exporters use. Whereas existing research has typically operationalised export channel integration as the exporter's channel governance structure, this research asserts the need to conceptualise this construct as a perceptual measure incorporating notions of control, ownership, influence and involvement in the channel.

The research then asks the question; what factors influence the exporter's level of channel integration?

To answer this question, a review of current literature was conducted to assist in the development of a testable model. A questionnaire was distributed to New Zealand firms belonging to the Canterbury Manufacturers' Association. Questionnaire data then underwent statistical analysis to determine the impact of specific influences across different levels of integration.

The results of this research have several implications, both for export marketers and marketing theorists. This research illuminates what influences the level of integration in export distribution channels. This enables more effective export strategy formulation by providing a framework to guide the export channel decision: Specifically, it provides guidance to exporting companies facing export channel structure decisions in terms of important variables which should be considered and how they can balance their dependency on export channel intermediaries. From a deeper theoretical perspective, a fuller understanding of the general applicability of TCA, specifically in the New Zealand context, is generated.