Legal versus relational ordering in channel governance: the case of the manufacturer and its foreign distributor

Abstract

Given the confluence of opportunism, bounded rationality, and asset specificity in a partnership, the participants may attempt to expropriate certain rents. This type of rent is called the quasi-rent, and it is the reason for participating in the relationship in the first place (Alchian & Woodward, 1988). A quasi-rent is the excess above the returns necessary to sustain the current use of resources. It can be the means to recover sunk costs, such as investments in assets in general, and relational assets in our context. A relational quasi-rent is that portion of the quasi-rent generated by a resource that depends on the partner's resources (Hill, 1990). It stems from investment in specialized assets to support a partnership. Also this rent is the amount, which a partner can expropriate without destroying the relationship.

Citation

Deligonul, S. and Tamer Cavusgil, S. (2006), "Legal versus relational ordering in channel governance: the case of the manufacturer and its foreign distributor", Arthur Solberg, C. (Ed.) Relationship Between Exporters and Their Foreign Sales and Marketing Intermediaries (Advances in International Marketing, Vol. 16), Emerald Group Publishing Limited, Leeds, pp. 49-79. https://doi.org/10.1016/S1474-7979(05)16003-7