| Dual distribution is the simultaneous use of both vertically integrated and independent channels of distribution to sell the same product/service to the same market. While increasingly common (in part as manufacturers are adding direct e-commerce operations to their traditional channels) dual distribution is a puzzle because it is likely to be conflictual, wasteful and difficult to manage. Usually, one of the two channels is more efficient than the other in serving a market: therefore why use both? The understanding of this issue is critical, not only for manufacturers struggling without knowing which channel structure to adopt, but also for distributors that feel threatened by, and often react vigorously to, the adoption of this dual distribution strategy by manufacturers.; Theoretically, this dissertation extends the transaction cost economics framework by looking at the interrelationships between the decisions for a set of transactions. It explains under which circumstances the simultaneous adoption of both channels, through a reduction in the transaction costs associated with dealing with the independent operation, compensates for the costs of a dual distribution system. At the same time, it extends the dynamics of transaction cost economics, integrating this framework with the real options framework and explaining how dual distribution systems have a real option value under environmental uncertainty. This dissertation also studies the possible costs of conflict between channels resulting from the adoption of dual distribution channels suggesting that these will tend to be less used in situations where the potential for conflict is high. Empirically, this thesis contributes to the limited research in dual distribution systems, by using a survey methodology to collect archival and perceptual data to test the hypotheses. |
