Channel Equity: A Theoretical Framework And An Empirical Study

With economic globalization and the fast movement of marketing activities channels are playing a more and more important role in the management practice of firms. Channels are both the"place"of marketing activities and sources of firms'wealth. In the last ten years the concept of channel equity has frequently appeared in management practice and finance and marketing literature. Yet its basic theoretical research remains underdeveloped though Marketing Science Institute has included channel equity as the priority research themes between 2006 and 2008. So establishing a theoretical framework for channel equity by defining channel equity and finding out its connotation, specialties, constituents and antecedents becomes the main purpose of this study.This paper studies the reasons behind the slow development of channel equity theory, discusses the marketing ideas reflected in channel equity concept and points out clearly directions for future development and theories to be integrated. When analyzing the dilemma facing channel equity theory development we find that based on transaction cost analysis and resource dependence theory the prevailing channel research has been left far behind other marketing theories as its focus has been on reducing conflict and opportunism. This inactive view on channel relationship fails to capture the value of channel relationship and is under doubt of relationship marketing scholars. When reviewing equity's usage in marketing literature we can see that channel equity is not simply a combination of channel and equity but a reflection of research orientation to integrate financial means with management theories. Following the development of brand equity and customer equity channel equity theory can develop in marketing, management and finance directions. In the marketing direction channel equity theory needs to integrate IMP, channel relationship theory and market orientation theory, fully develop the theoretical framework of channel equity and find out the connections between channel equity and market orientation. In the finance direction channel equity pricing and shareholder value need to draw on Srivastava's market-based assets theory and his analytical framework. In the management direction the extended resource-based view and relational view will help discuss the linkage between channel equity and firms'sustained competitive advantage.This paper gives a general definition to channel equity and digs into its connotations and features. It also discusses relations between channel equity, channel relationships and channel values. Basing on differences between various channel equity definitions in background, wording, modeling and focuses the paper gives a general definition: Channel equity is valuable resources emerging from long-term channel exchanges. It can be owned or controlled by the manufacturer and can bring out potential economic benefits in the future. Channel equity consists of tangibles and intangibles, book assets and non-book assets. The intangible non-book assets have great potential for creating shareholder value and helping business to grow, and thus become the object for this study. Effectiveness and scarcity are basic features of channel equity, and individualistic features include competition-orientation, indivisibility and uncertainty of benefits. Effectiveness means channel equity can bring future economic benefits to the firm; scarcity means channel equity takes price. Channel equity and channel relationships, channel values have dialectical relations: Relationships help form channel equity, and the value of relationships shows the value of channel equity (yet does not represent all). Channel equity shows the value of channels and is the main component of non-economic values produced by marketing channels.The paper puts forward a three-dimensional dynamic structuring model of channel equity, and basing on sources and formations of interfirm resources, divides channel equity into relational, intellectual and network-based. Relational channel equity which represents the successful channel relationship developed under the guidance of marketing ideas is the first to emerge and consists of network relationship structure, relationship quality and channel members. It belongs to relational marketplace equity. Intellectual channel equity comes after relational channel equity. It is intellectual equity developed from within marketing channels, consisting of market knowledge and non-market knowledge. It is the most valuable channel equity and belongs to intellectual marketplace equity. Network-resource-based channel equity, both network and out-network, is built upon the control and exploration of channel partners'resources. It drives shareholder value through changing the firm's cash flow. Relational channel equity and network-resource-based channel equity originate from the control/exploitation of out-of-firm resources and are influenced by the firm's capabilities to control resources. Intellectual channel equity is completely possessed by the firm and is brought forth through organizational learning and information sharing. From the perspective of resource-based theory and relationship marketing, the three kinds of channel equity interact with each other and influence and help develop mutually. The three-dimensional dynamic structuring model shows clearly this feature of channel equity.Within dynamic capabilities view, the dynamic capabilities driving channel equity include capabilities to acquire resources and to explore resources. The dynamic capabilities to acquire resources refer to the technology and caliber to obtain key resources from channel activities according to the firm's need. The dynamic capabilities to explore resources refer to the ability to integrate, redistribute and give full play to resources already obtained. These two kinds of dynamic capabilities have marked impacts on channel equity, and channel equity increase rests on the improvement of the firm's capabilities.