Research on Social Effects of Supplier-initiated Punishment and Reward in a Distribution Network


Student thesis: Doctoral Thesis

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Award date10 Sep 2019


In virtually every distribution network, suppliers frequently use punishment and reward to garner desired attitudes and acceptable behavior from their distributors, which may ultimately promote the development of the entire distribution system. Despite the prevalence of research on this topic, the majority of studies have investigated punishment and reward events in a dyadic context of a supplier and a punished/rewarded distributor, while little is known about whether and how other distributors in the same distribution network react to their observation of these punishment/reward events (i.e., social effect). To address these research voids, this dissertation conducts three studies to examine the social effects of punishment and reward in the distribution network. Overall, this dissertation contributes to channel governance literatures by uncovering the far-reaching, social effects of punishment and reward; hence, this dissertation provides a stepping-stone for some intriguing research avenues that scholars can pursue in the future. The specific content and research implications of this dissertation are as follows.

First, this dissertation enriches the literature on channel punishment by unveiling a curvilinear mechanism through which punishment severity influences observer opportunism, and by outlining the boundary conditions of such influence through the observer’s horizontal (network centrality) and vertical (dependence on the supplier) relationships within the distribution network. Although one recent study has broadened the bilateral view by empirically exploring the social effects of punishment on observer opportunism, it one-sidedly suggests an inhibitory (i.e., negative linear) effect. Drawing on social learning theory, essay one recognizes both inhibitive and imitative learning forces inherent in a single punishment event, and clarifies how they jointly determine the ultimate curvilinear effect of punishment severity on observer opportunism. Survey data gathered from 218 distributors in China’s automobile industry showed an inverted U-shaped effect of punishment severity on observer opportunism, and this effect was weakened by both the network centrality of the observers and their degree of dependence on the supplier.

Second, this dissertation, to the best of our knowledge, is among the first to move beyond a bilateral view in investigating the social effects of channel rewards on observer compliance, and to delineate the boundary conditions for such effects by examining social and reward-approach cues. Based on social learning theory, essay two develops a new construct (i.e., expectation of reward, defined as the extent to which an observer expects to gain similar rewards as the rewarded peers do), and verifies the realization of a social learning process in which reward magnitude strengthens observer compliance through altering the expectation of reward. Survey data from 310 Chinese distributors in multiple industries indicated that reward magnitude strengthens the observer’s expectation of reward, in turn increasing observer compliance toward the supplier. Moreover, the positive relationship between reward magnitude and observer expectation of reward is strengthened by the observer’s perception of reward fairness, but attenuated by the rewarded peer’s network centrality and an outcome-based reward approach.

Third, this dissertation enriches the research on the antecedents of the social effects of reward by considering both the magnitude (i.e., absolute level) and fairness (i.e., relative level) of the reward. More importantly, this dissertation opens the “black box” underlying the social effects of reward by confirming that channel rewards influence observer commitment by provoking two types of envy in the observer. Testing of these findings in a survey of 204 Chinese distributors from three industries revealed that the distributive fairness of the reward strengthens observer commitment by decreasing malicious envy and increasing benign envy, and that procedural fairness and reward magnitude enhance observer commitment by increasing benign envy.

    Research areas

  • Punishment, Reward, Social effect, Distribution network, Distributor attitude and behavior