The Termination Dilemma of Foreign Intermediaries: Performance, Anti-Shirking Measures and Hold-Up Safeguards

31 Pages Posted: 14 Jun 2005

See all articles by Björn Preuss

Björn Preuss

Copenhagen Business School

Torben Pedersen

Copenhagen Business School - Department of Strategic Management and Globalization

Gabriel R.G. Benito

BI Norwegian Business School

Abstract

This study examines the "termination dilemma" phenomenon of foreign intermediaries operating in export markets of great sales potential to their principals/exporters. Both low and high sales performances evoke risks of termination: either via replacement with another intermediary, or through the establishment of a sales subsidiary. The termination dilemma induces foreign intermediaries to make no more than a mediocre sales effort, thereby imposing losses to exporters. The paper investigates how anti-shirking measures (such as outcome-based remuneration and monitoring instruments) and hold-up safeguards (e.g. severance payment) put in place by exporters may mitigate such problems. The empirical study is based on a longitudinal data set of 258 Danish exporting firms and their relations to foreign intermediaries in major export markets over a 5-year period.

Keywords: Foreign intermediaries, international distribution, switches

JEL Classification: F23, L24, M31

Suggested Citation

Preuss, Björn and Pedersen, Torben and Garcia Benito, Gabriel Robertstad, The Termination Dilemma of Foreign Intermediaries: Performance, Anti-Shirking Measures and Hold-Up Safeguards. Available at SSRN: https://ssrn.com/abstract=741808 or http://dx.doi.org/10.2139/ssrn.741808

Björn Preuss

Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark

Torben Pedersen

Copenhagen Business School - Department of Strategic Management and Globalization ( email )

Porcelænshaven 24
Frederiksberg, 2000
Denmark
+45 3815 3030 (Phone)
+45 3815 3035 (Fax)

HOME PAGE: http://www.cbs.dk/staff/tp

Gabriel Robertstad Garcia Benito (Contact Author)

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway

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