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Deterring dealer slackness: The role of supplier incentives and monitoring and the market environment

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  • Zhang, Zhikun
  • Zhang, Chuang
  • Shen, Lu

Abstract

It is vital for suppliers to deter dealer slackness and to encourage dealers to work harder. However, dealer slackness has been largely overlooked in the literature. Based on agency theory, we theorize dealer slackness as a specific form of moral hazard. This research investigates the role of two supplier governance strategies, incentives, and monitoring, in inhibiting dealer slackness and the moderating effects of market uncertainty and competitive intensity. Using data from 211 dealers in China, the results indicate that supplier incentives are a useful tool to curb dealer slackness, while supplier monitoring encourages this misbehavior. The deterrent effect of supplier incentives is reinforced in a highly competitive and uncertain market. In addition, supplier monitoring reduces dealer slackness in an intensely competitive market. Overall, our research contributes to the literature by identifying a less explored form of moral hazard behavior and exploring ways to curb it.

Suggested Citation

  • Zhang, Zhikun & Zhang, Chuang & Shen, Lu, 2020. "Deterring dealer slackness: The role of supplier incentives and monitoring and the market environment," Journal of Business Research, Elsevier, vol. 121(C), pages 353-363.
    • Handle: RePEc:eee:jbrese:v:121:y:2020:i:c:p:353-363
    DOI: 10.1016/j.jbusres.2020.09.014
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