Interorganisational relationships between client and advertising agency: the effect of the external environment

Abstract

The potential effect of external environmental forces on an internal dyadic relationships has not received much attention in the study of relationship marketing. This research incorporates the influence of the headquarters (HQ) as an external environmental factor which potentially has an impact on the relationship between client subsidiaries (CS) and advertising agency subsidiaries (AS). The purpose of this research is to evaluate the degree of influence which multinational corporations (MNCs) client HQ and agency HQ pose on CS and AS relationships by using the political economy paradigm. Data was collected by a questionnaire survey mailed to both CS and AS. Multiple regression was used to analyse the results.The results indicate that the relationship between CS and AS can be affected by the external influence of the HQ especially when the HQ provides resources and a centralised approach is followed. Thus, the degree of HQ's influence, could be minimised if the subsidiary has less dependency on the resources allocated by the HQ, and if decision making regarding the relationship between CS and AS follows a more decentralised approach. This research contributes to the existing theory development by extending the knowledge of the interaction between the internal and external environment using the political economy framework. The results of this research can be beneficial for advertising agencies by identifying factors that might improve relationships with clients. In addition both CS and AS could try to safeguard or minimise negative impacts of their respective HQ's influence on their relationships. This research also contributes to the literature on multinational corporations by identifying factors that can mitigate problems of power and control that exist in the relationship between the subsidiary and the HQ.