Integration of the Sales Force: An Empirical Examination

1. Integration of the Sales Force: An Empirical Examination Presented by: Sandra Corredor

2. Motivation Few empirical tests of the uncertainty and behavioral [bounded rationality & opportunism] issues posed by TCE E.g. Monteverde and Teece (1982) and Teece (1980) Further: studies human assets V.I. When vertical integration takes place? What determines whether to use direct selling or representative agency in the electronic components industry? Reps: 50% manufacturing firms used them, only 10% of sales thru this channel.

3. Problem: assets become specialized to a relationship, and the parties are locked into bilateral exchange� opportunism and maladaptation arise. Asset specificity

4. Problem: assets become specialized to a relationship, and the parties are locked into bilateral exchange� opportunism and maladaptation arise. Asset specificity

5. Environmental uncertainty: �mkt superiority is undisturbed -unless assets are specific to a nontrivial degree� (p.387) Problem: incomplete contracts Uncertainty

6. Environmental uncertainty: �mkt superiority is undisturbed -unless assets are specific to a nontrivial degree� (p.387) Problem: incomplete contracts Uncertainty

7. Problem: for infrequent transactions losses from opportunism and inflexibility are likely to be lower than the V.I. firm's incremental overhead Frequency

8. Problem: for infrequent transactions losses from opportunism and inflexibility are likely to be lower than the V.I. firm's incremental overhead Frequency

9. Problem: Large firms can achieve economies of scale in utilizing management skills, and the desirability of integration increases as density increases (though the breakeven point is unknown) Size

10. Problem: Large firms can achieve economies of scale in utilizing management skills, and the desirability of integration increases as density increases (though the breakeven point is unknown) Size

11. Variables

12. Conclusions about what determines the decision of V.I. does not mean that that decision was the best (eg. Performance impact as evaluated by Poppo & Zanger, 98) Evaluating performance is the strongest predictor of V.I.: reasonable for human assets. Given that all firms were from the electronic components, environmental uncertainty could have a lower variance. This is a firm-centered analysis: no competitive dynamics (even geographic competition could vary).

13. Poppo & Zanger (1998) clarify the mechanism thru which size affect V.I. likelihood� not thru an impact on the performance of the external outsourced activities, but thru an impact on the performance of the internally sourced activity. Asset obsolescence idea on Balakishnan & Wernerfelt (1986) could also be a dimension of the frequency with which an asset is expected to be transacted.