An important topic in marketing involves how manufacturers

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1 Allen M. Weiss, Ein Andesn. & Debah J. Maclnnis Reputatin Management as a Mtivatin f Sales Stuctue Decisins The auths examine whethe eputatin cncens affect hw manufactues stuctue thei sales ganizatin. Using eputatin they, they examine whethe eputatin-elated peceptins and beliefs affect whethe a manufactue that cuently uses an utside selling ganizatin {i.e., a "ep") intends t vetically integate the selling functin switch t a new ep. In paticula, they ppse that a manufactue's intentins t eplace its cuent manufactues' ep with a cmpany sales fce a diffeent ep is a functin f its peceptins f the eputatin f itself and the ep and its beliefs abut hw high-eputatin manufactues in the industy typically ganize thei selling functin. Suvey data suppt the plausibility f these eputatin-based aguments as facts that influence sales ganizatin stuctue decisins. These esults pvide sme imptant extensins t eputatin they. The auths discuss the study's implicatins f bth manageial behavi and the liteatue n channels and ganizatinal gvenance. An imptant tpic in maketing invlves hw manufactues chse the stuctue f thei sales ganizatin (e.g., Andesn 1985; Andesn and Cughlan 1987; Klein, Fazie, and Rth 1990). Manufactuing fims ften ceate thei sales ganizatin by utsucing the pesnal selling functin t an independent ganizatin (i.e., a manufactues' "ep"). Ove time, manufactues may decide t change thei sales ganizatin stuctue by vetically Integating the selling functin maintain the stuctue but switch t a diffeent ep (Cey, Cespedes, and Rangan 1989; Weiss and Kuland 1997). Cuently, eseach addessing the mtivatins undelying these decisins is limited in at least tw ways. A fist limitatin is that, thugh seveal theies have been ppsed t explain manufactues" mtivatins f using eithe a ep a vetically integated sales ganizatin stuctue, mst ae tied t ecnmic-based efficiency effectiveness mtivatins (Heide 1994) with an emphasis n the le f tansactin-specific assets (e.g., Andesn 1985, 1988; Heide and Jhn 1988). Althugh ecnmic mtivatins undubtedly affect sales stuctue decisins (Pwes 1987), findings by Weiss and Andesn (1992) suggest tbe mtivatins. Thei esults indicate that manufactues manipulate the peceived csts f changing thei cuent ep s Allen M. Weiss is Assciate Pfess f Maketing, Univesity f Suthen Califnia. Enn Andesn is Pfess f Maketing, INSEAD, Debah J. Maclnnis is Assciate Pfess f Maketing, Univesity f Suthen Califnia.This eseach was suppted by the Maketing Science Institute. Tfie auths thank Buce Hadie and Vijay Mehta f thei capable eseach assistance. The fist auth is a David and Jeanne Tappen Fellw f Maketing. The secnd auth was a visiting pfess at the Eupean Institute f Advanced Studies in Management (Bussels) and Ihe Cathlic Univesity f Mns (Mns, Belgium) while wking n this pject and is cuently the Jhn Ludn Chaied Pfess f Intenatinal Management. they appea cnsistent with thei pecnceived intentins t change. Thus, the decisin t vetically integate the selling functin change eps appeas t be psychlgically mtivated, with "ecnmic" atinales assembled as pstdecisin justificatins. Meve, bsevatins f such decisins in pactice suggest the existence f specific psychlgical mtivatins thse gunded in the decisin's impact n the fim's eputatin. Reseach in management, scilgy, and psychlgy is cnsistent with the idea that manageial decisins ae affected by cnsideatin f tbe fim's eputatin (Bmely 1993; Fmbun and Shanley 1990). Hweve, the effect f eputatin n sales ganizatin decisins has been neithe theetically ppsed n empiically tested. A secnd limitatin f cuent eseach n a fim's decisin t utsuce integate its selling functin is the assumptin that thee was n stuctue in place and that fims select the mst apppiate stuctue f ging fwad. Hweve, the pesence f a peexisting system appeas t affect the system ging fwad (Andesn 1985; Andesn and Cuglan 1987). Futheme, changing fm ne system t anthe is nt cstless. As Weiss and Andesn (1992) demnstate, peceived switching csts indeed d dete manufactues fm switching fm a manufactues' ep t an emplyee sales fce. Thus, it is useful t cnside hw fims make sales ganizatin stuctue decisins, assuming a stuctue is aleady in place. The cuent eseach builds n these ideas by examining whetbe eputatin cncens influence hw manufactues intend t stuctue thei sales ganizatin. Ou study fcuses n manufactues that cuently use an independent sales fce. We ask whethe thei intentins t integate vetically switch t a diffeent ep ae diven by eputatinal cncens. Reputatin they (Bmley 1993; Danve and Shanley 1995; Emie 1990; Fmbun and Shanley 1990) guides u empiical pedictins. In the fllwing sectins 74 / Junal f Maketing, Octbe 1999 Junal f Maketing Vl. 63 (Octbe 1999), 74-89

2 we eview liteatue elating t eputatin cnstucts and develp explicit hyptheses. We pesent the esults f the empiical study and end with a discussin f its limitatins, implicatins, and diectins f futhe eseach. Ou study makes seveal cntibutins. Fist, we ffe theetical gunding and empiical suppt f the idea that sales ganizatin stuctue decisins ae influenced by eputatin cncens. Secnd, we demnstate tbe unique insights gained by examining a manufactue's peceptins f its wn eputatin, its ep's eputatin, and the eputatin gap between the tw. Thid, we identify manageial implicatins that stem fm u findings. Cnceptual Backgund What Is Reputatin? Reputatin is defmed as "an impessin f public esteem high egad judged by thes" {Meiam Webste's Cllegiate Dictinay 1996, p. looi). Seveal aspects f the definitin waant attentin. Fist, it is Imptant t claify the meaning f "public esteem" and "high egad." Pi wk suggests an ganizatin is held in public esteem high egad when it is viewed as btb visible and cedible (e.g., establisbed, pfessinal, and a stable playe in tbe maketplace) (Fmbun 1996; Fmbum and Sbanley 1990). Altbugh individual pesns may have peceptins f an ganizatin's eputatin f specific things (e.g., its eputatin f fainess, quality, and gd hiing pactices), eseach suggests that pesns tend t make glbal evaluatins f an ganizatin's eputatin. Hence, eputatin tends t be egaded as a unidimensinal, nt multidimensinal, cnstuct (Thcus 1993; Yn, Guffey, and Kijewski 1993). In accd with these ideas, we view eputatin as a glbal peceptin f the extent t which an ganizatin is held in high esteem egad. Secnd, it is useful t cnside the entities whse eputatins may be evaluated (Bmley 1993). In a sales ganizatinal stuctue cntext, a manufactue may cnside the eputatin f at least tw entities; itself and its cuent ep. In the pesent study, we examine the eputatin f bth. We assess these cnstucts sepaately and examine the impact f any gap between them. Thid, it is imptant t specify the "the peple" wh judge eputatins. Multiple extenal publics may judge an ganizatin's eputatin (e.g., industy analysts, stckhldes). Hweve, in a sales ganizatin cntext the manufactue is likely t be cncened paticulaly abut hw custmes peceive it and Its ep (whethe veidical nt). Thus, we fcus n the manufactue's peceptins f the extent t which custmes hld the manufactue and its ep in high egad. Futh, it is imptant t diffeentiate cnceptually "eputatin" fm the me specific tem "image." Reputatin and image ae cnceptually simila, because bth eflect peceptins f an entity. Hweve, they ae cnceptually distinct in seveal imptant ways. Fist, an image eflects a set f assciatins linked t a band cmpany name that summaizes a band fim's identity (i.e., what it stands f; Pak, Jawski, and Maclnnis 1986), Thus, United Ailines cultivates an image f fiendliness, Apple an image f ease f use, Rlex an image f luxuy, and Campbell's an image f bme cking. Reputatin, in cntast, eflects an veall judgment egading the extent t which a fim is held in high esteem egad, nt the specific identity it has. Thus, wheeas image eflects what a fim stands f, eputatin eflects hw well it has dne in the eyes f the maketplace, image and eputatin ae distinct cncepts as each can vay independent f the the. A fim can change its image thugh epsitining, thugh its eputatin emains intact. Thus, the "sfte side f Seas" campaign has alteed custmes' peceptins f what Seas' stands f (its Image), thugh it has nt affected the esteem egad with which custmes view Seas. (Seas has been and still is egaded as a highly eputable fim.) Cnvesely, a fim's eputatin may be affected negatively, even thugh its image emains intact. F example, a estauant with an image f "geat fast fd" may be egaded as nneputable if it is discveed tbat its wne is engaged in illicit activities. Ntably, tbugb, this negative eputatin need nt alte custmes' image f the estauant as a place that seves geat fast fd. Secnd, the extent t which custmes view a specific image as desiable is likely t be specific t a maket segment. As such, a fim's image may nt necessaily be desiable t custmes even tbugh they may agee that its visibility and cedibility ende its eputatin highly psitive. Thus, Rlex may have an image f luxuy and a highly favable eputatin as a cmpany, even thugh the image f luxuy may nt be desiable t all custmes. In cntast, custmes ae likely t egad a favable eputatin as desiable n matte wbat segment they belng t. Basic Elements f Reputatin They and Its Link t Maketing Reputatin they (Bmley 1993; Emle 1990) suggests that a scial entity (e.g., a pesn, an ganizatin) engages in seveal eputatin-elated pcesses. It actively mnits eputatins bth its wn and tbes'. Evidence suggests fims indeed ae inteested in mniting thei wn eputatin (Bmely 1993; Leuthesse 1988). A well-ecgnized measue by Owen (1993), f example, examines tbe esteem witb which custmes hld vaius bands and cmpanies. Manufactues als may be cncened abut mniting the eputatin f thei ep. This idea is cnsistent with agency they (Begen, Dutta, and Walke 1992). That liteatue views mniting f an agent (i.e., a ep) as imptant because it assumes that tbe extent t wbich a manufactue designs an efficient cntact shuld be linked, in pat, with its ability t mnit its ep's activities. Mniting gives ise t peceptins f the extent t which the entity's eputatin is gd bad. Mniting als facilitates the develpment f eputatin-elated beliefs. Such beliefs may be descibed as eithe causal desciptive (Fishbein and Ajzen 1975; Nisbett and Rss 1980). Tbe fme eflect the extent t which a specific actin is viewed as instumental in affecting a fim's eputatin. In a causal belief statement, the bseve believes that X dives Y. F example, a manufactue may have stng beliefs tbat its wn p eputatin is caused by its affiliatin witb a cetain ep. Reputatin Management / 75

3 Desciptive beliefs, in cntast, eflect a set f assciatins tied t a scial categy. F example, a manufactue may attach t its schema f "highly eputable fims" beliefs abut the chaacteistics assciated with these fims (e.g., highly eputable fims use thei wn sales fce). Desciptive beliefs simply epesent bsevatins withut efeence t causality. Witings by pactitines indicate that pactitines indeed d hld eputatin-elated beliefs. Lebell (1971, 1977), a pactitine-wite, wites that eputable manufactues suppt the ep bette and impve the ep's cedibility. Similaly, Lavin (1991) f Lavin Assciates, a cnsulting fim that specializes in cnsulting t eps and manufactues, wites that the lines the ep caies affect its eputatin. That these beliefs exist is als evident in u wn discussins with manufactues and eps. In additin t mniting eputatins, eputatin they ppses that a scial entity als acts t manage its eputatin (Bmely 1993). Reputatin management is a geneal phenmenn that need nt ccu in espnse t a eputatin pblem. In the wds, wheeas an entity with a p eputatin may engage in actins that enhance its eputatin, even an entity with a favable eputatin may engage in actins designed t sustain enhance its eputatinal standing. Althugh ideas egading eputatin management have nt eceived much attentin in the maketing liteatue, the ntin that a manufactue is cncened abut managing its eputatin seems plausible, because eputatin peceptins ae linked with utcmes deemed imptant t the fim (f eviews, see Bmley 1993; Yn, Guffey, and Kijewski 1993). F example, favable eputatin peceptins have been linked with a fim's ability t suvive cises (Shivastavas and Simks 1989), psitive custme attitudes twad the cmpany's pducts and salespeple (Bwn 1995), enhanced buying intentins (Yn, Guffey, and Kijewski 1993), and chice (Tayn 1983). Ideas egading eputatin mniting and management have nt been applied diectly t maketing activities, including the sales ganizatin stuctue decisin.' Yet, a fim's sales fce is the face f the cmpany t what is aguably its mst imptant gup f cnstituents: its custmes. The cmpany's suvival and pspeity depends n custmes' eactins t its pduct ffeing, a eactin heavily dependent n the cmpetence f the fim's sales fce. Thus, il seems imptant t examine whethe eputatin elated peceptins and beliefs (deived fm mniting activities) affect a manufactue's intentins t change its sales ganizatin stuctue by vetically integating by staying In using eputatin they t pedict the intentins f a manufactue, we ften a.ssume an analgy between an individual pesn and an ganizatin. In his eview f ganizatinal they n this issue, Russeau (1985) suggests such analgies be made with cautin. The analgy is mst likely t apply in settings whee a few peple ae key playes and whee a cespnding ecnmic atinale can be develped f scial-psychlgical pcesses. In u hypthesis develpment in the next sectin, we nte such atinales. Ou setting, as nted in the "Methdlgy" sectin, is ne in which the key {thugh nt the nly) playes ae sales manages and sales agency heads. with the cuent stuctue but switching eps. If s, such actins may be diect effts n the pat f the manufactue t manage its eputatin. In the fllwing sectins, we use eputatin they t ffe insight int these issues. Hyptheses The Peceived Gap in Reputatin and Beliefs as Bases f Actins The gap in peceived eputatin. A fundamental pinciple f eputatin they is that a scial entity is an assiduus mnit f its wn eputatin and that it actively attempts t uncve the eputatins f thes (Bmley 1993; Emie 1990). In a sales ganizatin stuctue cntext, this suggests that a manufactue may mnit custmes' peceptins f bth its wn eputatin and the eputatin f its ep. Meve, because a manufactue may mnit the eputatin f bth entities, the tw eputatins may be cmpaed. Scial cmpaisn they (Festinge 1954) pupts that scial entities ae mtivated t cmpae thei abilities and chaacteistics with efeent thes. Such efeent thes may pvide a fame f efeence against which ne's wn chaacteistics ae judged (Tvesky and Kahneman 1981). Pi eseach indicates that scial cmpaisns ae endemic in an ganizatinal cntext. They ccu amng pesns within a fim (e.g., Sweeney, McFalin, and Inteidieden 1990), between ganizatinal membes and the fim as a whle (Duttn, Dukeich, and Haquail 1994), and amng fims (e.g., Elsbach and Kame 1996). Such cmpaisns ae paticulaly likely when the dimensin f cmpaisn is viewed as imptant highly elevant t the scial entity. Because eputatins ae egaded as imptant and elevant t fims, we anticipate that a scial cmpaisn pcess egading eputatin indeed des peate amng fims. The eputatin f the manufactue and the ep ae cmpaable because, thugh they may be based n diffeent things (e.g., the ability t pduce high-quality pducts, the ability t manage custme elatinships thugh selling), each is a peceptin f hw well the manufactue selling ganizatin has dne in the eyes f the maketplace. In a sense, the eputatin is the gade the custme assigns the ganizatin the ep. Because they d diffeent things, the gades ae cmputed diffeently, but an "A" gade still means high egad. If a fim des cmpae its eputatin with efeent thes', such mniting may give ise t a gap between the peceived eputatin f ne entity (e.g., the manufactue) and anthe (e.g., its ep). Reputatin gap is defined as the distance between the peceived eputatin f tw entities. The distance between the peceived eputatin f the tw entities has tw citical cmpnents: diectin and magnitude. Diectin efes t whethe the manufactue's eputatin is me favable (a psitive gap) less favable (a negative gap) than that f its ep. Magnitude eflects the extent t which such a gap (whethe psitive negative) is lage small. Thus, a lage psitive gap exists when the manufactue peceives its wn eputatin as fa me psitive than that f its ep. N gap exists when the manufactue peceives its eputatin as simila t that f its ep. A lage 76 / Junal f Maketing, Octbe 1999

4 negative gap exists wben the manufactue peceives its eputatin as fa less psitive than that f its ep. Ntably, althugh eputatin they assumes scial entities ae assiduus eputatin mnits, the cncept f a eputatin gap is an extensin f the they. Hence, the subsequent "gap" hyptheses ae egaded as explaty. Meve, althugh we have fund n publisbed liteatue descibing the extent t which manufactues and sales eps develp peceptins f a eputatin gap, that peceptins f a eputatin gap ae fmed seems t be natual because manufactues and eps ae assumed t be active mnits f thei wn eputatin and that f the entities. T the extent that evidence implicating effects f a eputatin gap ae bseved, tbis eseacb will be tbe fist t establish tbe imptance f the gap cncept. The mtivatinal ppeties f a psitive peceived gap. If the manufactue des cmpae its eputatin with that f its ep, the existence f a psitive gap may affect the manufactue's desie t take actin t manage this gap. Thee ae tw easns t expect that a lage psitive gap heightens the manufactue's need t act. Fist, because tbe manufactue is cncened abut its eputatin, a peceptin f its ep as having a eputatin significantly infei t its wn may lead a manufactue t believe that the ep's eputatin is csting the manufactue sales and pehaps magin. Faming they pedicts that scial entities ae geneally sensitive t mnetay lsses and that the effects f such lsses lm lage than gains (Kahneman and Tvesky 1979; Tvesky and Kahneman 1991). Because manufactues geneally ae avese t lss, they may be mtivated t act t educe these ecnmic csts. Secnd, a eputatin gap als may mtivate the manufactue with a significantly favable eputatin as cmpaed with its ep t act because it may believe that it has utgwn its ep and is capable f eithe attacting a ep with a bette eputatin ("mving up") pefming tbe selling functin bette itself The le f eputatin-elated beliefs. Desie t manage a eputatin, hweve, des nt pvide any indicatin f the eputatin-management actin taken. Reputatin they pedicts that anthe fact is necessay t undestand the specific actins taken t enhance sustain a eputatin. Me specifically, eputatin peceptins affect eputatin management actins when they ae cnsistent with eputatinelated beliefs. Because u pevius discussin f tbe gap cncept explicitly fcuses n eputatin peceptins (f tbe manufactue as cmpaed with its ep) and nt beliefs, we claify hee the cncept f eputatin-elated beliefs. Peviusly, we identified seveal classes f eputatinelated beliefs. We fcus hee n desciptive beliefs specifically, the extent t which the manufactue stngly believes that higbly eputable fims use thei wn sales fce. We fcus n tbis belief vaiable f tw easns. Fist, beliefs abut tbe pactices f highly eputable fims may seve as a fame f efeence, pttype, example f "best pactice." Thus, wbeeas tbe ep may pvide ne fame f efeence against which the fim's eputatin is judged, the pactices f highly eputable fims may pvide anthe fame f efeence against which eputatin-elated sales ganizatin stuctue issues ae cnsideed. Secnd, this belief vaiable pvides a faily stng lest f eputatin tbey. Althugh fims may intend t act in a manne cnsistent with what they believe causally affects thei wn eputatin, it is nt bvius that desciptive beliefs abut what highly eputable fims d ae sufficiently salient imptant t affect such intentins. Peceptual gap-belief cnsistency. If eputatin des affect sales ganizatin stuctue decisins in a manne cnsistent with eputatin management they, we shuld find that eputatin peceptins ae me likely t affect thse eputatin management actins that ae cnsistent with eputatin-elated beliefs. We theefe expect that the eputatin gap and beliefs abut the efficacy f eputatin-elated actins jintly affect tbe eputatin-management actins intended by the manufactue. Thus, the me a manufactue peceives that its wn fim's eputatin is bette tban the eputatin f its ep (i.e., thee is a psitive gap), the me the manufactue shuld manage this eputatin gap in a manne cnsistent with its eputatin-elated beliefs. The me stngly it believes that highly eputable fims use tbei wn sales fces, the me it shuld manage this eputatin gap by ding what it believes highly eputable fims d using a vetically integated sales ganizatin. Specifically, we expect the fllwing: H a:the manufactue's intentins t vetically integate incease wilh cmbined inceases in (I) the psitive gap between the manufactue's peceptin f its wn eputatin and that f its ep and (2) its belief thai highly eputable fims use thei wn sales fce. Wheeas H[a fcuses n belief-cnsistent eputatin management actins, a diect implicatin f the they is that a manufactue shuld be less likely t pefm beliefincnsistent eputatin management actins. If a manufactue peceives a lage psitive eputatin gap and stngly believes that highly eputable fims use tbei wn sales fce, ne actin incnsistent with this belief is t change eps. It shuld theefe nt manage this gap by ding smething diffeent fm what it believes eputable fims d (e.g., cbange eps). Thus, t the extent that switching eps is a viable actin, we shuld bseve tbe fllwing: Hit,: The manufactue's intentins t switch t a new ep decease with cmbined inceases in (I) the psitive gap between the manufactue's peceptin f its wn eputatin and that f its ep and (2) its belief that highly eputable fims use thei wn sales fce. Decupling Reputatin Peceptins The fllwing sectins extend u analysis f eputatin peceptins and beliefs in tw ways. Fist, althugh the gap cncept pvides an inteesting extensin f eputatin they, it fcuses nly n the elative diffeence in diectin and magnitude in eputatin peceptins between the manufactue and its ep. It theefe ignes the abslute level f eputatin peceptins f tbe manufactue and/ its ep. Tw diffeent gaps culd be equal in magnitude and diectin yet epesent vastly diffeent eputatin levels f bth the manufactue and its ep. Secnd, the gap cncept bfuscates the distinctin between the effects f the manufactue's eputatin and thse f the eputatin f its ep. As Reputatin Management / 77

5 such, it is difficult t tell whethe peceptins f the manufactue's eputatin and the ep's eputatin each inteact with beliefs t affect sales ganizatin stuctue intentins whethe the eputatin f ne entity (the manufactue the ep) plays a le and the the des nt. We exple these issues in the fllwing sectins. The ep's eputatin and the manufactue's beliefs as bases f actins. A manufactue's mtivatin f taking eputatin management actins is likely t suface when its ep's eputatiti is peceived t be p lw. The ntin that a ep with a p eputatin wuld mtivate a manufactue t manage this situatin actively is ctisistent wilh the "fundamental attibutin e" (e.g., Rss 1977). Specifically, scial entities tend t attibute negative utcmes that accue t anthe entity (e.g., sales belw expectatins achieved by the ep) t that entity's intenal chaacteistics (e.g., the ep's mtivatin ability), as ppsed t extenal suces (e.g., unftunate extaneus cicumstances). Tbus, if a manufactue peceives tbe ep's eputatin as p, it is likely t view tbe ep as sleiy and causally espnsible f disappinting esults. The manufactue may fail t cnside whethe thee might be mitigating cicumstances (sucb as an ecnmic dwntwn) wbetbe the manufactue itself is at fault (by missing delivey deadlines, f example). In sht, the manufactue may blame eps witb p eputatins f negative utcmes. Secnd, a ep with a p eputatin als may mtivate a manufactue t act because the manufactue may fea that this p eputatin may "infect" its wn eputatin. If the ep's p eputatin des mtivate the manufactue's desie t take eputatin management actins, cnsistent with eputatin management they, we anticipate that the manufactue's beliefs abut the extent t which highly eputable fims use thei wn sales fce will affect hw it acts. If the manufactue peceives the ep as ply eputed and it stngly believes tbat highly eputable fims use thei wn sales fce, it is likely t vetically integate. It sbuld nt d smething diffeent than what it believes eputable fims d (i.e., change eps). Thus, we expect the fllwing: H2a: The manufactue's intentins t vetically integate incea.se with cmbined deceases in the manufactue's peceptin f its ep's eputatin and inceases in the manufactue's belief that highly eputable fims use thei wn sales fce. V\2h- The manufactue's intentins t switch t a new ep decease with cmbined deceases in the manufactue's peceptin f its ep's eputatin and inceases in the manufactue's belief that highly eputable fims use thei wn sales fce. The manufactue's eputatin and beliefs as bases f actins. We als might questin whethe the manufactue's peceptin f its wn eputatin and its beliefs affects its eputatin-management actins. The geneal applicability f eputatin they t sales ganizatin stuctue decisins wuld be quite pweful if manufactues' actins als wee affected by these eputatin-elated vaiables. Again, extant they pvides sme inteesting pespectives n this issue. Because fims ae assumed t be active eputatin mnits and because they have an implicit desie t manage thei eputatins, we might expect that a manufactue's mtivatin t change its cuent ep elatinship might be stng wben it peceives its wn eputatin as p. Hweve, we d nt believe that a manufactue with a p eputatin attempts t enhance its eputatin by changing its sales ganizatin stuctue. Seveal facts mtivate u easning. Nte that a manufactue may attibute a p eputatin t eithe extenal facts its wn (p) effts. Let us lake each situatin in tun. Fist, it is highly likely that a manufactue will attibute a p eputatin t extenal facts. Tbis is pedicted n the basis f scial entities being biased in the extent t which they attibute success failue t themselves thes (Myes and Bach 1976), If a p eputatin is attibuted t extenal facts, it is questinable whethe this p eputatin is managed thugh changes in the selling functin. A p eputatin peceived t be caused by extenal facts might be due t extenal cicumstances the actins f any ne f seveal agents with whm it has diect cntact (e.g., supplies, financial institutins, distibuts, its selling patnes). Thus, altbugh a fim with a p eputatin indeed may engage in eputatin management activities, it is mst likely t engage in actins diectly elated t thse entities viewed as causally espnsible. Only in sme cases may the ep be viewed as the causal agent. In tbse the situatins, the mst effective actin is nt t change the selling ganizatin stuctue, but athe t engage in eputatin management activities that ae mst diectly elevant t the ffending paty. Secnd, even if the manufactue des attibute its p eputatin t its wn effts, it may be mtivated nt t act and t stay with its existing ep, because staying with the status qu seems like a safe ptin. Taking n the selling functin intenally (e.g., by vetically integating) wuld seem t be a elatively ineffective methd f enhancing a manufactue's eputatin, because its eputatin is aleady p. Futheme, a manufactue might nt believe that switching eps has the ptential t enhance its eputatin because its wn p eputatin might make it difficult f the manufactue t attact a me eputable ep. In cntast, we believe that a manufactue is mtivated t manage its eputatin thugh its sales ganizatin stuctue when its cuent eputatin is highly favable. Fist, because successes tend l be attibuted t neself, a manufactue with a favable eputatin is likely t peceive that its wn actins ae espnsible f its eputatinal success. Because it has been espnsible f ganeing a psitive eputatin, it sbuld be equally capable f sustaining it in the futue. Secnd, fims that believe they ae esteemed highly by custmes may see themselves as actual ptential membes f tbe bad categy f "bighly eputable" fims. Reseacb in bth individual (Tajfel et al. 1971; Tayl, Ccke, and D'Agstin 1978) and ganizatinal cntexts (Duttn, Dukeich, and Haquail 1994; Duttn and Penne 1993) suggests scial entities wish t peceive themselves as belnging t a gup. Meve, if a scial entity views its actual ideal self-identity as cnsistent with a scial categy, it is mtivated t act t maintain peseve its assciatin with such a gup s as t diffeentiate itself fm utgup membes (i.e., nneputable fims) (Kelley 1988; Tayl etal. 1978). 78 / Junal f Maketing, Octbe 1999

6 If inceases in the manufactue's peceptin f its eputatin d incease its desie t manage its eputatin actively, we anticipate that the manufactue's beliefs abut the extent t which highly eputable fims use thei wn sales fce will affect hw it acts. Cnsistent with eputatin management they, the manufactue shuld act in a manne cnsistent with its eputatin-elated beliefs. Thus, the me the manufactue peceives itself as highly eputed and the me stngly it believes that highly eputable fims use thei wn sales fce, the me it is likely t vetically integate. It shuld nt d smething diffeent than what it believes eputable fims d (i.e., change eps). Thus, we expect the fllwing: H3a: The manufactue's intentins t vetically integate incease with cmbined inceases in the manufactue's peceptin f its wn eputatin and its belief Ihat highly eputable fims use thei wn sales fce. Hii,: The manufactue's intentins t switch t a new ep decease with cmbined inceases in the manufactue's peceptin f its wn eputatin and its belief that highly eputable fims use thei wn sales fce. Methdlgy Cntext and Sampling Stategy We gatheed data fm manages in the electnic cmpnents industy. Seveal facts mtivated the selectin f this industy. Fist, sales ganizatin stuctue is egaded as an imptant fact that detemines maketplace success in this industy. The industy cntext theefe pvides an pptunity t bseve the ptential impact f eputatinbased mtives n sales ganizatin stuctue decisins. Secnd, this industy is chaacteized by intense cmpetitin, a wide ange f pduct ffeings, and divese subenvinmcnts (ceating vaiatin n cucial vaiables). Meve, eseaches (e.g., Andesn 1985) have nted cnsideable vaiatin in the usage f ep and diect sales fces in this industy. Thid, because wk n sales ganizatin stuctue typically has fcused n ecnmic mtivatins, using an industy f which ecnmic mtivatins f sales stuctue decisins ae stng ceates a elatively sevee test f the eputatinal mtive. With the cpeatin f tw tade assciatins and a maj industy publicatin, a andm sample f 1209 cmpanies knwn t use manufactues' eps was dawn fm tw tade assciatin mailing lists. Petested suveys wee sent t the distict sales manage in each fim wh was in a psitin t indicate the fim's intentin in elatin t the ep. These manages seve as the manufactue's liaisn t the ep and stngly influence the ganizatin's view f the ep. They ae espnsible f detemining the futue f the ep's elatinship with the manufactue (Gibbns 1988), and they ae the citical decisin make egading sales ganizatin stuctue decisins. Because u espndents ae knwledgeable and influential egading the ep ganizatin, they satisfy Campbell's (1955) citeia f key infmants. Callbacks and a fllw-up mailing esulted in 258 espnses. One hunded fty-thee f the 1209 fims wee subsequently identified as "ut f business." Hence, the espnse ate was estimated cnsevatively as 24%. Cmpaisn f ealy and late espndents, in which late espndents ae taken as epesentative f nn espndents (Amstng and Ovetn 1977), evealed n statistically significant diffeences in the desciptive chaacteistics f these gups. Reps ae lcal entities, and manufactues typically cve a maketplace by patching tgethe a netwk f eps, all peating in diffeent gegaphies with diffeent custme bases. The questinnaie asked espndents t chse ne cuent ep ganizatin in the sales manage's distict and espnd with this ep and its custmes in mind. Thee vesins f the suvey wee distibuted in equal pptins. Each asked manages t espnd egading ne f thei bette, midange, pe eps, espectively. This pcedue was designed t ceate vaiatin in the dependent vaiables. Retuns came back in appximately equal pptins t the thee distibuted questinnaies; f the 258 etuned questinnaies, 90 f(k:used n a pe-pefming ep, 84 n a midange ep, and 84 n a best-pefming ep. Oveall, the theat f nnespnse bias appeas minimal. The questinnaie was develped using extensive petesting. The suvey was administeed pesnally t a distict sales manage fm each f five diffeent manufactues. The suvey minimized hal effects by allwing indicats f the cnstucts t be sepaated by seveal the questins. F example, seven pages f questins sepaated the scales measuing manages' peceived eputatin f the ep and thei intentin t use a diect sales fce. The petest evealed that espndents culd espnd easily t the measues and the suvey instument. Measue Develpment Measues f all cnstucts wee develped using guidelines ecmmended by Nunnally (1978). The dmain f the elevant cnstuct fist was specified. Items subsequently wee dafted n the basis f thei mapping with the cnstuct's cnceptual detinitin. Mst f the items ae ecded n a seven-pint agee-disagee fmat. Items wee petested f claity and apppiateness using a pilt sample f five distict sales manages and wee ewitten if necessay. Cmbined, the thee hyptheses eflect the tw dependent vaiables we descibe next. Dependent Measues Intentin t integate vetically. The manufactue's intentin t integate the selling functin flntegratej was indicated by a six-item scale (Cnbach's alpha =.90). These items index the manufactue's seiusness abut dispensing with its ep and setting up a diect sales fce in the nea futue (tw yeas less). An example f an item fm this scale is, "We will cnvet this teity t a diect sales fce in the nea futue." Intentin t change eps. The manufactue's intentin t change t a diffeent manufactues' ep (CHANGEREP) was assessed by a sepaate fu-item scale (Cnbach's alpha =.90) tapping the manufactue's seiusness abut switching eps ve the nea tem (tw yeas less). Extensive petesting indicated this culd be peatinaiized as tw yeas less. An example f an item f this scale is, "In Reputatin Management / 79

7 this distict, we intend t d u sales thugh a diffeent ep within the next tw yeas." Manages' espnses t the CHANGEREP and INTE- GRATE scales wee thgnal ( =.002, p <.48). This empiical esult is cnsistent with petest espndents' cmments that they did nt necessaily view these as eithe- decisins. The statistical independence f these tw measues is als cnsisteni with the idea that cnsideatin f bth ptins can pceed in paallel f sme time. The statistical independence f these tw measues is imptant, because if these wee eithe- decisins, empiical suppt f the secnd pat f each f the thee hyptheses (e.g., Hih) culd be cnsideed edundant with the fist pat (e.g.. Hi a). That the cnstucts ae thgnal suggests that statistical suppt ejectin f eithe pat f the hypthesis is pssible. Independent Vaiables Peceptins f the manufactue's eputatin. The manufactue's impessin f hw custmes peceive its wn eputatin (OWNREPUTAT) was assessed by a seven-pint semantic diffeential scale cnsisting f five petested items (e.g., "Hw d buyes in this sales teity view yu cmpany at this time?" [unstable; stable]). Opeatinally, fims with me favable eputatins believe thei custmes peceive them as highly egaded, pfessinal, successful, well-established, and stable. These items ae nt designed t assess whethe the manufactue has a eputatin f anything in paticula. N is it evident what actins, attibutes, signals the manufactue may pssess emply t ceate the impessin f having a favable eputatin. Thus, cnsistent with the unidimensinal pespective n eputatin (e.g., Yn, Gulfey, and Kijewski 1993), this measue captues genealized eputatin peceptins. Reliability f this measue is easnably high (Cnbach's alpha =.84). Theefe, all items wee summed t fm a cmpsite index. Peceptins f the ep's eputatin. The manufactue's impessin f hw custmes peceive its ep's eputatin (REPsREPUTAT) was assessed using the same five items in espnse t a questin abut hw custmes view the manufactues' ep. Reliability f this scale is als high (Cnbach's alpha =.86), and items wee summed t fm a cmpsite index. The extent t which a manufactue peceives its ep t have a p eputatin is measued with a evese scale f REPsREPUTAT. We call this vaiable REPs- DEFICIT. It is used in u statistical test f H2. Peceptins f the eputatin gap. The measue f the gap between the peceptin f the manufactue's eputatin and that f its ep (GAP) was assessed by subtacting REPsREPUTAT fm OWNREPUTAT. The cefficient alpha f this diffeence sce is.80, as calculated using the methd f Pete, Chuchill, and Bwn (1993). Beliefs abut what eputable ftms d. The manufactue's belief that highly eputable fims use an integated sales fce (BELIEF) was indicated by a set f fu questins that asked manages t ate n a 1-7 disagee/agee scale the extent t which they believe the mst established and successful fims use thei wn sales fce and the extent t which they believe fims that use thei wn sales fce ae egaded with cnfidence and ae taken seiusly (e.g., ae eputable). An example f this item is, "Custmes in this business have me cnfidence in fims which have thei wn sales fce" (! = disagee; 7 = agee). The eliability f this fu-item scale is adequate (Cnbach's alpha =.75). Because thee is n cnsensus in this industy abut whethe using a diect sales fce signals a fim's eputatin, thee is cnsideable vaiatin in u data set n this belief vaiable. Cntl Vaiables We included seveal vaiables knwn t affect ganizatinal stuctue decisins in all statistical tests as cntl vaiables. We als included the vaiables thught ptentially t affect intentins t vetically integate switch t a diffeent ep as cntls. We descibe the specific cntl vaiables and the atinale f thei inclusin next. Tansactin-specific assets. Tansactin-specific investments stabilize elatinships by putting bth paties at isk f lsses fm ptential pptunistic hehavi (Heide and Jhn 1988; Weiss and Kuland 1997; Williamsn 1985). This cntasts with de nv cntexts, in which the anticipatin f investing in specific assets can esuu in vetical integatin (Andesn 1985, 1988; Williamsn 1985). The existence f tansactin-specific assets shuld educe the manufactue's intentin t vetically integate switch eps. We examined tw types f tansactin-specific investments: (I) the extent f the ep's tansactin-specific investments in the manufactue and (2) the extent f the ep's tansact in-specific investments in the manufactue's custmes. The fme (MANTSA) was indicated by a sevenitem scale (e.g., "This ep has invested a lt f time and efft t lean all the ins and uts f my ganizatin"; Cnbach's alpha =.88), wheeas the latte (CUSTSA) was indexed with a fu-item scale (e.g., "This ep builds a lt f value int u pduct line by pviding special sevices t buyes"; Cnbach's alpha =.82). All items wee measued using seven-pint ageement scales. Rep pefmance. Anthe easn f maintaining the cuent ep elatinship is the ep's pefmance. Theefe, we included the pefmance f the ep as a cntl vaiable that was based n the thee categies f ep pefmance (p, midange, best) emplyed in the questinnaies. Using p ep pefmance as a basis, we cnstucted tw dummy vaiables. MIDPERF is I f a midange-pefming ep and 0 thewise, and BESTPERF is 1 f a best-pefming ep and 0 thewise. Manufactue size. Lage manufactues may have the esuces bth t exit cuent ep elatinships and t set up a diect sales fce. We emplyed a tw-item index f the manufactue's size (SIZE) t accunt f this effect ( =.67). A sample item is, "Please cicle the numbe which best descibes hw buyes in this sales teity view yu ganizatin at this time" (seven-pint Liket scale, anched small/lage)..//c^/. A maj cnsideatin in a fim's ability t vetically integate is the cst f exiting the ep elatinship and the cst f setting up a diect sales fce. A six-item, seven- BO / Junal f Maketing, Octbe 1999

8 pint ageement scale (EXITST) measues these csts (Cnbach's alpha =.84). A sample item is, "We face vey high haies l switching ve t a diect ganizatin." Ability t find qualified eps. The manufactue is me likely t switch t a diffeent ep if the manufactue peceives that the qualified eps ae available and ae willing t epesent the manufactue. T accunt f this pssihility, a tw-item index (OURPICK) f the ability f the manufactue t find the qualified eps was emplyed (=.61). F example, ne f (he items asked subjects t indicate thei ageement with the statement "Ou line is s desiable we culd have u pick f manufactues' eps in this teity." Bth items wee measued using seven-pint ageement scales. Satisfactin with the cuent ep. Manufactues that ae satisfied with thei cuent ep shuld be likely t emain with that ep. Cnsequently, we included a five-item, sevenpint ageement scale (SATISFACTION) in all statistical mdels. A sample item fm this scale is, "We ae vey dissatisfied with this manufactues' ep" {evesed item). Cnbach's alpha f this scale is.92. In summay, we included seveal cntl vaiables in u statistical tests. These include vaiables identified in pi liteatue as elevant t ganizatinal stuctue decisins, seveal f which ae ecnmic in natue (i.e., tansactinspecific assets, ep pefmance, size, exit csts, and ability t find qualified eps). The celatin matix f the scales is pesented in Table I. Results Measue Validatin Pcedues Pi t testing the hyptheses, the multi-item measues wee subjected t a seies f validity checks. Fist, we cnducted item-t-iteni ttal celatins and explaty fact analysis. Each item appeaed t belng t the apppiate dmain, and nne exhibited significant css-ladings. Theefe, n items wee deleted fm futhe analysis. We then subjected the entie set f items t a cnfimaty fact analysis. Fllwing Gebing and Andesn (1988), we estimated a measuement mdel in which evey item was esticted t lad n its a pii specified fact, and the facts themselves wee pemitted t celate. We btained maximum likelihd estimates f the measuement mde! using EQS. The veall chi-squae statistic f the mdel was significant (X^(I2I9) = , p <.001), as might be expected given the size f u sample (Bagzzi and Yi 1988). Hweve, the cmpaative fit index (CFI -.89; Bentle 1990) and the t mean squae esidual (RMSR =.066) epesent evidence f gd mdel fit. Each fact lading is significant at the.01 level. The glbal measuement mdel thus pvides satisfacty evidence f the unldimensinality f the measues. The cettlcient alpha f each item set ais pvides satisfacty evidence f eliability. Next, we estimated a set f additinal mdels in which the individual fact celatins wee esticted t unity ne at a time. We cmpaed the fit f these esticted mdels with that f the iginal mdel. The vaius chi-squae diffeence tests ae all significant and pvide evidence f disciminant validity (Bagzzi, Yi, and Phillips 1991). Tests f the Hyptheses The esults f the hypthesis tests ae shwn in Tables 2 and 3. Befe testing each hypthesis, we estimated tw baseline mdels, each f which included nly the elevant dependent vaiable (e.g., INTEGRATE, CHANGEREP) and the cntl vaiables. Subsequently, we added the eputatin vaiables t each baseline mdel and eestimated the mdel. By cmpaing the baseline and full mdels using an F statistic, we can examine the explanaty pwe f the eputatin vaiables. As shwn at the bttm f Tables 2 and 3, the mdels with the eputatin vaiables added significantly t the explanaty pwe f the baseline mdels in all cases. Theefe, we pesent nly the estimatin esults f the mdels that include the eputatin vaiables. Hi pedicts that the manufactue's intentin t vetically integate (H a) switch eps (H b) is detemined jintly by the peceived eputatin gap between the manufactue and its cuent ep and its belief that eputable fims use a diect sales fce. T test the tw pats f this hypthesis, we estimated tw multivaiate mdels using intentin t vetically integate and intentin t switch eps as the dependent vaiables. The independent vaiables included ihe inteactin between the gap in eputatin peceptins and the belief vaiable (GAP x BELIEF) and the cntl vaiables. In additin, we included tw the sets f vaiables. Fist, because the gap measue is a diffeence sce, spuius celatins may esult fm the celatin f the cmpnent measues (REPsREPUTAT and OWNREPUTAT) with the gap measue. We add the tw cmpnent measues in this statistical test t cntl f this pssibility. Secnd, althugh thee is n theetical atinale f ppsing diect effects f these eputatin-elated vaiables, we included the vaiables cmpsing the inteactin tem t avid pssible specificatin e. The test f Hla cespnds t the inteactin tem (GAP X BELIEF) having a significant and psitive effect n the manufactue's intentin t integate the selling functin. Nting the esults in clumn 1 f Table 2, we see that the cefficient f the inteactin between GAP and BELIEF is psitive and significant (.222, t = 4.96, p <.01), theeby suppting Hia. Specifically, as bth the gap in eputatin peceptins and the belief that highly eputable fims use thei wn in-huse sales fces incease, manufactues' intentins t engage in vetical integatin als incease. Of the cntl vaiables, nly the exit cst vaiable is significantly elated t the intentin t vetically integate (-.261, t = -5.21,/7<. 01). The test f H b cespnds t the inteactin tems (GAPx BELIEF) having a significant and negative effect n the manufactue's intentins t change eps. Clumn 2 f Table 2 shws that the cefficients f the inteactin tem (GAP X BELIEF) is significant and negative (-.183, t = -3.87, p <.01), thus suppting Hj^,. Thus, manufactue's intentins t switch t a new ep decease with cmbined inceases in the psitive gap between the manufactue's pe- Reputatin Management / 81

9 O) eg CM O ai O3 O CM O CM 0 ^ CM O O O) -- eg -^ ay q CVJ q LO q q I l' -* T^ T^ ^ eg q 7.0 CD O en en in CM - c q CM eg O '- -- em q cvi m CD cy CM CD Cvl in 1- CD a> eg 199 ^ 1- CD Hi -^ m (0 c.0 0) q eg CD CM c in CM eg CNJ [ en 00 q 1- cy >- O <- CM t q q I (D.- eg >- CM q q q in q ii '-^ T-^ i--^ - t in q Ol in q in in 1- O O CJ) c "5 CT c SuJ < Ii c CD C CD O 2 c Is '^ <i> 2 TJ ( i^ cn t 5 (0 (fl (0 - *' 5 a. (0 w "5 ~.2 Q- 0 «O 0) ^-^ O) c "3= 0 U) TJ C Q- < Q.»= "J.Cfl B 2?. ^^ «!= <D -"S U "^ (H ^ 3UJ.ECC d ^ 3.- CJ cd ^ O) TJ C a; i8 ~ 0 t- 0 C7LU a 0-0 UJ O Q_ 52- *- 0-0) ' ii: -s a. Q) 5 fflo «w ^'^ Q. 0 ffl LU -O yi «LU UJ."_' LU -^ p -ll 2 0 -> 0 Ol ] (O 1-5 *- 0 -C..Si il 3 ^ 3 Q- u- _3 3 3 ^ _?^ 3.fcj *-' c 0 S" ^^ ^ 3 ^ m O CD D- 0 ^' -^ XJ 3. "I X D g n in.^ -9 C A M t is u 82 / Junai f Maketing, Octbe 1999

10 TABLE 2 Un standadized Estimatin Resuits f (t-statistjcs in paentheses) Hypthesis Dependent Vaiables H 1b Independent Vaiables INTEGRATE Manufactue's intentin t integate the selling functin CHANGEREP Manufactue's intentin t change t a diffeent ep NSTANT 1.48 (1.84) (-.40) GAP Diffeence between manufactue's peceptin f its wn eputatin and ts ep's eputatin BELIEF Manufactue's beiief that highly eputable fims use an integated sales fce GAP X BELIEF MANTSA Extent f the manufactue's tansactin-specific investments in the ep CUSTSA Rep's specific investments in the manufactue's custmes EXITST Csts f exiting the ep elatinship and setting up a diect sales fce csts OURPICK Ability f the manufactue t find and attact the qualified eps SIZE Manufactue's size SATISFACTION Manufactue's satisfactin with its ep OWNREPUTAT Manufactue's peceptin f its wn eputatin REPsREPUTAT Manufactue's peceptin t its manufactues' ep's eputatin MIDPERF BESTPERF Adjusted R2 F F statistic f baseline mdel cmpaisn p <.05 (2-tailed test). "p<, (.773).441 (7.80)".222 (4.96)" (-.22).011 (.17) (-5.21)".057 (1.02) (1.71) (-1.85) 1.14 (1.83) (-.51) (.66) " 35.4".172 (.26) (-2.52)* (-3.87)* (-.26) (-.57).034 (.59) (-.95) (8.66)" (-.58).427 (.659) (-.80) (-.18) " 8.6" Reputatin Management / 83

11 ceptin f its wn eputatin and its ep and its belief that highly eputable fims use thei wn sales fce. Of the cntl vaiables, nly the manufactue's satisfactin with its cuent ep is significant and negatively elated t the likelihd f changing eps (-.714, t = -8.66,/j<.01). The pcess f testing tbe emaining hyptheses is identical t tbe methd descibed peviusly. In paticula, t test H2 and H3, we estimated anthe set f multivaiate mdels. The esults ae shwn in Table 3. The dependent vaiables include tbe intentins t vetically integate and t switcb TABLE 3 Unstandadized Estimatin Resuits f H2 and H3 (t-statisties in paentheses) H,,/ 2a'3a INTEGRATE Manufactue's intentin t integate the selling functin Hypthesis Dependent Vaiables '3b CHANGEREP Manufactue's intentin t change t a diffeent ep Independent Vaiables NSTANT OWNREPUTAT Manufactue's peceptin f its vi/n sputafin REPsDEFICIT Manufactue's peceptin f the extent that its ep has a p eputatin BELIEF Manufactue's belief that highly eputable fims use an integated sales fce OWNREPUTAT X BELIEF REPsDEFICIT X BELIEF MANTSA Extent f the manufactue's tansactin-specific investments in the ep CUSTSA Rep's specific investments in the manufactue's custmes EXITST Csts f exiting the ep elatinship and setting up a diect sales fce csts OURPICK Ability f the manufactue t find and attact the qualified eps SIZE Manufactue's size SATISFACTION Manufactue's satisfactin with its ep MIDPERF BESTPERF Adjusted R2 F statistic f baseline mdel cmpaisn *p <.05 (2-tailed test), **p< (4.36)" (-3.49)** (-3.82)" (-3.02)** 217 (3.75)".227 (4.29)* (-.25).020 (.28) (-4.97)".054 (.96) -13 (164) (-.69) (-.74) " 20.2" (-2.27)'.633 (3.25)".584 (3.21 )** 1.16 (3.09)** (-3.15)" (-3.20)** (.27) (-.57).035 (.60) (-.91) (8.67)* (-.75) (-.15) ** 4.96** 84 / Junal f Maketing, Octbe 1999

12 eps. The independent vaiables ae the inteactin amng the eputatin peceptin vaiables and beliefs (OWNREP- UTAT X BELIEF and REPsDEFICIT x BELIEF), the individual cmpnents f the inteactin tems (OWNREPU- TAT REPsDFFICIT, BELIEF), and the cntl vaiables. The test f H2a cespnds t the inteactin tem (REPsDEFICIT x BELIEF) having a significant and psitive effect n the manufactue's intentins t integate the selling functin. The esults shwn in clumn I f Table 3 suppt this hypthesis. Specifically, the inteactin between REPsDEFICIT and BELIEF is significant and in the hypthesized psitive diectin (.227, t = 4.29, p<.01). The test f Hib cespnds t the inteactin tem (REPs- DEFICIT X BELIEF) having a significant and negative effect n the manufactue's intentins t change eps. As shwn in clumn 2 f Table 3, tbe inteactin is indeed significant and negative (-. 178, t =: -3.20, p<.0\). Thus, as the manufactue's peceptin f its ep's eputatin deceases and its belief tbat bighly eputable fims use an integated sales fce inceases, the likelihd f vetically integating the selling functin inceases and the likelihd f changing eps deceases. The test f H^^ cespnds t the inteactin tem (OWNREPUTAT x BELIEF) having a significant and psitive effect n the manufactue's intentins t vetically integate, wheeas the test f H31, cespnds t the inteactin tem having a significant and negative effect n the manufactue's intentins t switch eps. Suppt f H^^ is fund in clumn 1 f Table 3. The cefficient f the inteactin between OWNREPUTAT and BELIEF is psitive and significantly elated t the manufactue's intentin t vetically integate (.217, t = 3.75, p <.01). Clumn 2 f Table 3 shws that the estimate f the same inteactin is significant and negatively elated t the intentin t change eps(-.l90, t = -3.l5,/j<.05). Of the cntl vaiables, nly the exit cst vaiable is significantly elated t the intentin t vetically integate (-.249, t = ^.97, p <.01). Only the manufactue's satisfactin with its ep is elated significantly t its intentin t change eps ( t = -8.67, p<.0\). Althugh the data suppt each f the hyptheses, the esults in Table 3 suggest that the eputatin-elated vaiables exet a diect effect n tbe dependent vaiables. Because f the pesence f tbe inteactins, bweve, tbese diect effects can be intepeted nly within the cntext f the inteactin (Fiedich 1982). As an example, the diect effect f REPsDEFICIT n the manufactue's intentins t vetically integate is nt mntnic ve the entie ange f BE- LIEF. This can be seen by taking tbe patial deivative f the egessin equatin with espect t REPsDEFICIT and pltting the esulting equatin (Schnhven 1981). In Figue I, Pat A, we shw that f lw levels f BELIEF (<.663/.227 = 2.92), an incease in REPsDEFICIT actually has a negative effect n the likelihd f vetical integatin, wheeas this effect is psitive f elatively high levels. In Figue I, Pat B, we shw the diect effect f REPs- DEFICIT n intentins t switch eps. Hee, f lw levels f BELIEF (<.584/.I78 = 3.26), an incea.se in REPs- DEEiCIT actually has a psitive effect n the likelihd f switching eps, wheeas this effect is negative f elatively FIGURE 1 Manufactues' Intentins Acss the Range f Beliefs A: The Effects f Beliefs (BELIEF) n the Relatinship Between the Rep's Reputatin and Intentins t integate (INTEGRATE) (fm Table 3) 6 INTEGRATE/ 5 REPsDEFICIT 6 REPsDEFICIT BELIEF = (BELIEF! B:The Effects f Beliefs (BELIEF) n the Relatinship Between the Rep s P Reputatin (REPsDEFICIT) and Intentins t Change Reps (CHANGEREP) (fm Table 3) 8CHANGEREP/ 5 REPsDEFICIT 6CHANGEREP SREPsDEFICIT =.5K4 -.I7tt (BELIEF) high levels. Theefe, althugh these diect effects ae inteesting, they can be undestd nly within the cntext f the inteactin. Using the same methd, a simila set f esults can be btained t demnstate that the diect effect f OWNREP- UTAT n bth intentins t vetically integate and t change eps is nt mntnic ve the entie ange f BE- LIEF F lw levels f BELIEF «.647/.217 = 2.98), an incease in OWNREPUTAT actually has a negative effect n the likelihd f ging diect, wheeas this effect is psitive f elatively high levels. Hweve, f lw levels f BE- LIEF {<.633/.19O = 3.33), an incease in OWNREPUTAT actually has a psitive effect n the likelihd f switching eps, wheeas this effect is negative f elatively high levels. We discuss these diect effects me fully in the "Discussin" sectin. Summay Discussin The pupse f this eseach was t detemine whethe eputatin cncens influence hw manufactues that cuent- Reputatin Management / 85

13 ly use an independent sales fce intend t stuctue thei sales ganizatin. Relying n eputatin they, we suggest that manufactues bth mnit and attempt t manage thei wn eputatin and that decisins egading the stuctue f the sales ganizatin ae diven by these eputatinelated pcesses. Specifically, we hypthesize that manufactues that cuently use an independent sales fce develp peceptins f thei wn eputatin, the eputatin f thei ep, and the eputatin gap between the tw and that these peceptins wk jintly with thei beliefs abut what eputable fims d t influence thei sales ganizatin stuctue intentins. We hypthesize and find that as the gap becmes me psitive, such that the manufactue's eputatin exceeds that f the ep, and the manufactue's beliefs that highly eputable ftttns use thei wn sales fce incease, the manufactue's intentin t change its sales ganizatin stuctue by vetically integating the sales fce als inceases. This actin eflects a cnsistency between manufactues' eputatin peceptins and thei beliefs. As pedicted by eputatin management they, manufactues ae unlikely t switch eps, because that wuld be incnsistent with thei beliefs abut what highly eputable fims d. Decmpsing tbe gap int its cnstituent elements, we ppse and bseve that peceptins f the eputatin f the ep and peceptins f the eputatin f the manufactue als mtivate eputatin management actins. Inteestingly, the effects f these peceptins, alng with thei beliefs, ae asymmetic, because manufactues cnside tbei wn eputatins diffeently tban that f thei ep. As the peceptin f the ep's eputatin becmes pe, the manufactue is likely t be inceasingly mtivated t manage this eputatin pblem, because the ep's p eputatin may affect the eputatin f the manufactue negatively. The way in which it manages the ep's eputatin pblem depends n its beliefs abut wbat bighly eputable fims d. As the manufactue's beliefs that eputable fims use thei wn sales fce incease, it is likely t slve this eputatin pblem by vetically integating tbe selling functin. In cntast, it is unlikely t cbse an altenative cuse f actin such as switching eps. When it cmes t the manufactue's peceptin f its wn eputatin, the effects ae evesed. Thse wh cunt themselves highly eputable appea eady t imitate what they believe is the chice f" highly eputable fims. Thus, as the manufactue's peceptin f its wn eputatin becmes me psitive, it appeas t be inceasingly mtivated t engage in eputatin management activities, and it appeas t cbse tbse actins tbat ae cnsistent witb its beliefs. Accdingly, manufactues with me favable eputatins bave geate intentins t vetically integate the selling functin and lwe intentins t switch eps as they incease thei belief that highly eputable fims use thei wn sales fces. This phenmenn, in which fims cme t esemble ne antbe by a pcess f imitatin, has been labeled "mimetic ismphism" in the ganizatin they liteatue (Galaskiewicz and Wasseman 1989). Seveal additinal aspects f the esults als deseve highlighting. Fist, the ntin that eputatin peceptins affect specific eputatin management actins when they ae cnsistent with eputatin-elated beliefs appeas quite geneal, as we bseved suppt f the ppsed inteactin f tbe manufactue's eputatin peceptin vaiable, the ep's eputatin peceptin, and the gap between the tw. Futheme, suppt f the GAP x BELIEF inteactins als appeas quite stng, as it was bseved even when we cntlled f the individual vaiables tbat cnstituted tbe gap measue. Secnd, it is ntable tbat the ppsed inteactins pved significant even when we included a hst f additinal vaiables that might explain intentins t engage in vetical integatin switch eps. Sme f these vaiables ae ecnmic in natue and bave been psited peviusly as mtivats f sales ganizatin stuctue decisins (e.g., peceived exit csts, tansactin-specific investments). Othes ae me specific t the pefmance f the ep (e.g., satisfactin with the ep, ep pefmance), and still thes eflect the extenal cnstaints affecting these decisins (e.g., ability t find qualified eps). It is als ntable that the mdels that included the eputatin vaiables epesented a significantly bette flt t the data than the mdels that excluded them. Thid, althugh the esults indicate hw peceptins and beliefs jintly affect eputatin management actins, the diect effects pvide additinal insight int hw peceptins and beliefs individually affect such decisins. F example, as shwn in Figue I, the effect f inceases in the manufactue's peceptins f the ep's eputatin n ging diect depends n beliefs abut what eputable fims d. Wben manufactues stngly believe that highly eputable fims use thei wn sales fce, intentins t vetically integate becme higbe because the ep's eputatin is peceived t be pe. This is cnsistent with H2 (Figue I, Pat A). Hweve, when manufactues d nt stngly believe that highly eputable fims use thei wn sales fce, intentins t vetically integate becme lwe as the ep's eputatin is peceived t be pe. What wuld the manufactue d in tbis case? Figue I, Pat B, eslves the issue, shwing that when beliefs ae weak, the me the ep's eputatin is peceived t be p, the me manufactues intend t switch eps. Thus, althugh manufactues ae mtivated t act when thei ep's eputatin is p, they d s in a manne that is nt incnsistent with thei beliefs. This same esult petains t the situatin in which the manufactue's wn eputatin is the fcus. Thus, the diect effect esults einfce the agument that cnsistency between eputatin peceptins and beliefs guide actin. Futh, it is ntable tbat tbe eputatin vaiables we examined bee appea t affect manufactues' intentins t engage in a faiiy dastic sales ganizatin stuctue change specifically the decisin t vetically integate the sales fce. Althugh it might appea that manufactues shuld slve a eputatin pblem with a ep by simply switching eps, that they chse a me cstly and intensive cuse f actin when they believe that highly eputable fims use thei wn sales fce is suggestive f the pwe f eputatin-elated cncens n sales ganizatin stuctue decisins. Limitatins This study, like mst, is subject t limitatins. The pincipal shtcming is the use f intentins as ppsed t bebavi as the bject f study. Unftunately, studying actual bebav- 66 / Junal f Maketing, Octbe 1999

14 i pses pactical cnstaints. These include the fast ate f pesnnel tunve in industies and the difficulty f discveing the cect pint in time at which t bseve actual behavi. Intentins d nt cespnd pefectly t eventual behavi; hweve, they tend t becme self- fulfilling. F example, a manufactue that secetly intends t teminate its ep elatinship may fail t suppt the ep, theeby damaging the ep's pefmance and inceasing the manufactue's incentive t teminate the elatinship. A secnd limitatin is u use f css-sectinal data, which limits u ability t detemine empiically the causal elatins implied in u hyptheses. Thid, u empiical study is cnducted within a single industy (f the easns discussed peviusly), which limits the genealizability f u esults. Theefe, additinal study f these eputatin-elated vaiables in the cntext f the industies is waanted. Anthe limitatin invlves u use f key infmant data. Althugh cae was taken t ensue that u key infmants wee chsen in accd with Campbell's (1955) citeia, a multiple infmant methd might be emplyed in the futue t educe any infmant biases that may aise in this eseach cntext. Futhe Reseach The findings hee, if eplicated when the peviusly mentined methdlgical pblems ae eslved, ae suggestive f a hst f additinal eseach t extend u findings. Fist, the cncept f a eputatin gap appeas t be a significant fact that affects intentins t engage in vetical integatin and theefe may be a basic fact affecting integanizatinal elatinship cntinuatin. Bth the gap cncept and its implicatins f elatinship cntinuatin, thugh explaty in the pesent eseach, ae extensins t eputatin they. Reseach that futhe examines the eputatin gap cncept seems waanted. Secnd, because eputatin peceptins ae assumed t influence belief-cnsistent eputatin management actins, it is useful t examine the inteactin f eputatin peceptins with beliefs the than the ne examined hee. F example, a natual implicatin f the they is that when a manufactue peceives the ep as having a p eputatin, it likely may switch eps when it believes that highly eputable fims use eps. Althugh this eseach did nt examine explicitly this belief vaiable, the esults bseved hee ae nt incnsistent with this idea. As Figue I indicates, f example, when the manufactue des nt believe that highly eputable fims use thei wn sales fce and when it peceives its ep's eputatin as p, it is likely t manage its affiliatin with a eputatin-deficient ep by switching eps. Reseach in the futue shuld extend the pesent study t investigate the inteactin f eputatin peceptins with beliefs abut eps. Thid, because beliefs seem t be imptant facts that guide the natue f eputatin management actins, additinal eseach that catalgs the types f eputatin-elated beliefs wuld be useful. We fcused n desciptive beliefs, s additinal study that incpates causal beliefs wuld be useful. Futh, wheeas u study fcused n the manufactue's intentins t vetically integate switch eps, a me basic set f issues egading the extent t which eputatinelated vaiables affect intentins t teminate the elatinship with the cuent ep appeas t be imptant. This wuld equie identifying a belief vaiable that diectly maps nt beliefs abut teminatin. One belief f inteest is the manufactues' belief that they can "climb the ladde f eps" in the sales distict. This teminlgy was suggested by a manufactues' ep duing peliminay inteviews. Althugh this idea is speculative, manufactues that stngly believe that it is pssible t climb the ladde f eps may intend t teminate a elatinship with a ep when they peceive that thei wn eputatin exceeds that f thei ep. They, in tun, may chse a ep whse eputatin bette matches thei wn. Futhe, enhancing thei wn eputatin may give ise t a eputatin gap between the manufactue and the new ep, which subsequently mtivates the seach f a ep with an even me favable eputatin. Thus, me eputable sales agencies may be paied with even me highly eputable, and hence highly demanding, manufactues, which may teminate them if they ae peceived t have nt kept pace with the manufactue's eputatin. If a bette undestanding f eputatin facts affecting teminatin decisins is deived, manufactues' eps may benefit by mniting thei manufactue's eputatin peceptins, thei wn eputatin peceptins, and elevant manufactue's beliefs. A manufactue that peceives its wn eputatin as gd ( the ep's eputatin as elatively p) and believes eputable fims use a vetically integated sales fce may be expected t be ecuiting pesnnel (ften in a clandestine fashin) and lking f ffice space in the sales distict. When the manufactue des nt believe eputable fims engage in vetical integatin, it may be expected t hld discete cnvesatins with the eps in the same distict. (The latte activity is ften easie t bseve, because it is a eady basis f gssip at tade assciatin meetings.) Fifth, given the imptant le f eputatin peceptins in u study, additinal eseach that examines hw the manufactue fms eputatin peceptins appeas waanted. What data d they use and what biases ente the cllectin and pcessing f infmatin elevant t eputatin assessment? Hw veidical ae assessments? Hw malleable ae they t, f example, plitical pcesses within the manufactue? And hw can the ep influence indeed manage the pcess by which manufactues assess eputatins as viewed by custmes? Because the ep is the pimay link between custmes and manufactues, eps shuld be able t manage the manufactue's impessin t sme extent. These findings suggest it is t the ep's advantage when the manufactue believes custmes think highly f the ep and less highly f the manufactue. This eseach is a fist and explaty step in the study f the effect f eputatin n sales fce ganizatin. The esults suggest that eputatin may have an imptant impact beynd (athe than in place f) me taditinal explanatins. 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