Network governance in marketing channels

Purpose This paper sets out to investigate the view that a firm's strategy in a marketing channel is contingent on the organization of its related upstream network of embeddedness. Design/methodology/approach An in‐depth documentary study of recent developments in marketing channels in the French Rhône Valley Appellation d'Origine Controlée wine industry combined with content analysis of qualitative data derived from interviews with local wine merchants and Inter‐Rhône wine experts. Findings The extended theoretical framework used in this case study enables researchers to more completely specify channel members' behavior. By taking into account not only general objectives but also legitimacy concerns of this type of organizations, it is possible to identify reputation and institutional commitment management in the upstream network as two governance mechanisms of equal importance to the mechanisms of vertical integration or management of relationships with suppliers. Research limitations/implications This study suggests the need for further research into external validity and measurement issues. Practical implications The study highlights the necessary governance mechanisms wine merchants have to deploy in their upper professional and supply networks in order to enhance their market performance. Successful positioning strategies seem to be more and more dependent on the wine merchants' ability to acquire a strong position and recognition in its upstream networks: only those who have taken into account the legitimacy issue and have deployed mechanisms to govern it effectively will survive the current internationalisation processes and avoid market decline. Originality/value This more nuanced channel approach offers a number of empirical illustrations to support the tri‐dimensional conceptualization of institutional environment suggested by Grewal and Ravi in 2002.