IMM-07451; No of Pages 12

Industrial Marketing Management xxx (2017) xxx–xxx

Contents lists available at ScienceDirect

Industrial Marketing Management

The dual effects of perceived unfairness on opportunism in channel relationships

Sandip Trada ⁎, Vikas Goyal
Indian Institute of Management Indore, India

a r t i c l e i n f o a b s t r a c t

Article history: Opportunism has long-term negative consequences for channel relationships. The extant research has tra-
Received 29 May 2016 ditionally focused on economic forces in studying opportunism. However, social exchange theory stresses
Received in revised form 26 January 2017 the role of social forces in shaping opportunistic behavior. In this study, we integrate transaction cost eco-
Accepted 31 January 2017
nomics and justice theory to theorize and examine the impact of ‘perceived unfairness’ on distributor op-
Available online xxxx
portunism. We uncover the ‘dual’ effects of perceived unfairness on opportunism, i.e., 1) directly
Keywords:
enhancing opportunism and 2) aggravating (positively moderating) the effects of economic forces on op-
Perceived unfairness portunism. Matched data on 247 supplier-distributor dyads in India provide empirical support for our the-
Opportunism oretical model and research hypotheses. We find differential effects of the three dimensions of perceived
Transaction cost economics unfairness (distributive, procedural, and interactional) on opportunism. We discuss the implications of
Emerging markets our findings for theory and practice and present avenues for future research.
Exchange hazards © 2017 Elsevier Inc. All rights reserved.
Distribution channel

1. Introduction
The distribution channel literature has increasingly acknowledged
channel partner relationships as an invaluable asset for supplier firms
and as an unparalleled source of long-term competitive advantage
(Homburg, Vollmayr, & Hahn, 2014; Yang, Sivadas, Kang, & Oh, 2012).
Firms often leverage channel partners' resources and capabilities to en-
hance their results and outputs (Kumar, Sunder, & Sharma, 2014).
Therefore, successful channel relationships are extremely critical to a
firm's performance. Conversely, the inferior management of channel re-
lationships can lead to several channel problems, such as heightened
conflicts, enhanced dysfunctional behaviors, and even relationship dis-
solution intentions (Kang & Jindal, 2015; Yang et al., 2012). To develop
and maintain successful channel relationships, it is not sufficient to
focus on relationship building factors alone but to also understand and
manage factors that destroy relationships (Kang & Jindal, 2015).
Among other factors, exchange partner opportunism has been identi-
fied as a key relationship-destroying factor (Samaha, Palmatier, &
Dant, 2011). In distribution contexts, channel partner opportunism
often occurs at the expense of the supplier's interests, in turn destroying
channel relationships over the long term (Wathne & Heide, 2000).
Opportunism, defined as “self-interest seeking with guile”
(Williamson, 1985, p. 47), can manifest in several forms, i.e., withhold-
ing or disclosing partial information, deception, misrepresentation,
spreading confusion, stealing, and failing to uphold promises and
⁎ Corresponding author.
E-mail addresses: f12sandipt@iimidr.ac.in (S. Trada), vikasg@iimidr.ac.in (V. Goyal).
obligations (Wathne & Heide, 2000). In recognizing the corrosive im-
pact of opportunism, researchers have made considerable efforts to
identify what drives opportunism. According to transaction cost eco-
nomics (TCE), three exchange hazards, i.e., relationship specific invest-
ments (RSIs), environmental uncertainty (EU) and behavioral
uncertainty (BU) are the key drivers of exchange partner opportunism
(Crosno & Dahlstrom, 2008; Rindfleisch & Heide, 1997). In attempts to
curtail opportunistic behaviors and effectively manage inter-firm ex-
changes, scholars have highlighted individual as well as complementary
effects of formal (i.e., bilateral RSIs, contract, and monitoring) and rela-
tional (i.e., trust and relational norms) governance mechanisms
(Brown, Dev, & Lee, 2000; Liu, Luo, & Liu, 2009; Wathne & Heide,
2000). To govern successful inter-firm relationships, it is important for
firms to understand the factors that motivate exchange partners to be-
have opportunistically.
According to social exchange theory, exchange partners' behaviors are
determined by the perceived equity of a relationship (Blau, 1964). In this
regard, social forces such as justice/fairness are fundamental for inter-firm
relationships (Griffith, Harvey, & Lusch, 2006). In distribution channels,
distributors often judge their gains relative to their efforts and perceive
manufacturer fairness/unfairness (Kumar, Scheer, & Steenkamp, 1995).
Such fairness/unfairness perceptions have profound effects on distribu-
tors' attitudes and behaviors. For example, supplier fairness has been
found to enhance trust and commitment in relationships (Kashyap &
Sivadas, 2012) and to shape distributors' relational behaviors (Griffith et
al., 2006). On the other hand, unfairness is known to generate strong feel-
ings of distrust (Kaufmann & Stern, 1988), to increase conflict (Brown,
Cobb, & Lusch, 2006), and to spur relationship dissolution intentions
(Yang et al., 2012). These responses to fairness/unfairness perceptions

http://dx.doi.org/10.1016/j.indmarman.2017.01.008
0019-8501/© 2017 Elsevier Inc. All rights reserved.

Please cite this article as: Trada, S., & Goyal, V., The dual effects of perceived unfairness on opportunism in channel relationships, Industrial Mar-
keting Management (2017), http://dx.doi.org/10.1016/j.indmarman.2017.01.008
2 S. Trada, V. Goyal / Industrial Marketing Management xxx (2017) xxx–xxx
are stronger in market and business cultures that are highly relationship-
oriented and where exchange partners maintain a long-term orientation
towards such relationships (Paul, Roy, & Mukhopadhyay, 2006).
Research on intra-firm relationships and service recovery domain
suggests that perceptions of unfairness directly influence the opportu-
nistic behaviors of exchange partners (Skarlicki & Folger, 1997; Wirtz
& McColl-Kennedy, 2010). While the inter-firm marketing literature
recognizes the key role of fairness/unfairness perceptions in exchange
relationships, our review of literature show that no study has empirical-
ly examined the effects of perceived unfairness on opportunism in dis-
tribution channels. Furthermore, recent distribution channel research
suggests that in addition to direct effects, perceived unfairness indirect-
ly interacts with other channel variables and shapes distributors' behav-
iors towards suppliers (Samaha et al., 2011). We believe that ‘perceived
fairness’ as a social force can complement economic forces in distribu-
tion channel relationships. It is thus necessary to examine the effects
of perceived unfairness on opportunism in distribution channel
relationships.
Drawing from justice theory (Adams, 1965), we examine the dual
impacts of ‘perceived unfairness’ on channel partner opportunism. Spe-
cifically, we examine direct effects of perceived unfairness (i.e., distrib-
utive, procedural, and interactional) on distributor opportunism and
indirect (moderating) effects of perceived unfairness on relationships
between TCE exchange hazards (i.e., supplier's RSIs, BU, and EU) and
distributor opportunism. To empirically test the hypotheses, we analyze
247 matched samples from supplier-distributor dyads in the Indian
pharmaceutical industry. Indian distribution channels serve as an ideal
context for testing effects of perceived unfairness on distributor oppor-
tunism due to the recognized dominance of social forces in inter-firm
relationships in India (Sharma, Young, & Wilkinson, 2006; Sheth,
2011). We contribute to the literature in several ways. First, we contrib-
ute to the TCE and relationship marketing literature by revealing new
social drivers of opportunism such as distributive, procedural and inter-
actional unfairness in channel relationships. Second, we contribute to
the literature on fairness/unfairness by examining the relative impor-
tance of three dimensions of unfairness on opportunism. Third, we con-
tribute to the growing literature on inter-firm governance in emerging
markets by presenting new and customized social ways to control oppor-
tunism under different channel conditions. Finally, we contribute by de-
veloping an integrated framework from two theoretical perspectives, i.e.,
Fig. A.1. Conceptual framework.
Please cite this article as: Trada, S., & Goyal, V., The dual effects of perceived unfairness on opportunism in channel relationships, Industrial Mar-
keting Management (2017), http://dx.doi.org/10.1016/j.indmarman.2017.01.008
justice theory and TCE perspectives for analyzing inter-firm relationships
(Fig. A.1).
2. Theory and hypotheses
2.1. Channel management in emerging markets
Channel management in emerging markets is a complex and chal-
lenging task due to the presence of unorganized and fragmented distri-
bution structures, inadequate information systems, under-developed
infrastructure and high opacity in channel activities (Sheth, 2011;
Srivastava, Handa, & Vohra, 2014). These characteristics amplify several
problems by spurring channel disputes, exacerbated information
asymmetries, higher costs of physical distribution and opportunism. In
contrast to developed markets, emerging markets are characterized by
higher levels of informality and collectivism and by cultures of uncer-
tainty avoidance (Paul et al., 2006). In such market, informal inter-per-
sonal relationships play a significant role in channel relationships and
may directly and indirectly influence distributor behaviors. Therefore,
these factors make channel management practices more complex and
challenging in emerging markets.
Specifically, the opportunistic behaviors of distributors consti-
tute the main cost of doing business in emerging markets such as
India owing to the country's evolving legal and formal institutions
(Nagavarapu & Sekhri, 2016; Trebbin, 2014). The absence of effec-
tive legal and regulatory systems needed to enforce formal supplier
governance practices (i.e., contracts) puts undue strain on relation-
ships between suppliers and their distributors (Yang, Zhou, & Jiang,
2011). It is thus essential for suppliers to use effective governance
practices when managing distribution channel relationships.
A supplier's ability to preserve strong relationships with distributors
can enhance channel outcomes and afford a firm a competitive advan-
tage (Liu et al., 2009). Researchers have suggested that suppliers in
emerging markets such as India should focus on issues of social gover-
nance, i.e., trust and commitment to developing strong relationships
with distributors (Sharma et al., 2006; Sheth, 2011). For example,
Trebbin (2014) suggested that informal institutions such as social
bonds may act as substitutes for formal contracts in India and limit dis-
tribution system leakage (Nagavarapu & Sekhri, 2016). Further, Luo
(2006) suggested that a social force (especially fairness) is a critical
 S. Trada, V. Goyal / Industrial Marketing Management xxx (2017) xxx–xxx
factor in determining distributors' opportunistic behaviors in emerging
markets such as India.
We believe that when a supplier fails to adopt an effective social
mechanism such as fairness policies in channel relationships, it may
not only directly invite a negative response from distributors but it
may also motivate distributors to leverage suppliers' other vulnerabil-
ities (i.e., exchange hazards). However, our understanding of this
issue is limited in reference to emerging markets. Therefore, relation-
ships between unfairness dimensions and exchange hazards and their
interactions with distributor behaviors clearly warrant further analysis
to enrich our understanding of channel management in emerging
markets.
2.2. Unfairness dimensions as drivers of opportunism
Justice/fairness theory is derived from principles of social exchange
(Blau, 1964) and equity theory (Adams, 1965). The concept of justice/
fairness has long been the focus of organizational research (Cohen-
Charash & Spector, 2001; Greenberg, 1990). Recently, it has been ex-
tended in inter-firm contexts such as strategic alliances (Luo, 2007)
and distribution channel relationships (Griffith et al., 2006; Kumar et
al., 1995; Samaha et al., 2011). The common premise of these studies
is that justice/fairness is the key social force applied when managing ex-
change relationships and achieving superior performance. In this study,
we focus on perceived unfairness/injustice rather than on fairness/
justice, as research in other disciplines suggests that a few negative
events (i.e., unfairness) can undermine the cumulative effects of multi-
ple positive episodes in exchange relationships (Gottman, 1994). Fur-
ther, recent research shows that perceived unfairness constitutes an
intolerable risk in business relationships and tempts distributors to
seek revenge with an unfair supplier even at their own cost (Abosag,
Yen, & Barnes, 2016; Samaha et al., 2011). Therefore, we believe that
the role of unfairness is greater than is generally recognized and unfair-
ness generates more severe responses from exchange partners than
fairness in channel relationships.
In the present study, unfairness is defined as the ways in which a
distributor judges a supplier's activities and as the resulting attitudes
and behaviors exhibited in relationships. The extant research on fair-
ness has presented three dimensions of unfairness: distributive, pro-
cedural and interactional. Distributive unfairness refers to the degree
to which a supplier's allocation of rewards is perceived as unfair or
disproportionate by distributors relative to their efforts in exchange
relationships (Samaha et al., 2011). Procedural unfairness refers to a
distributor's perceived partiality and injustice when making deci-
sions with a supplier that influences channel relationships (Kumar
et al., 1995). Interactional unfairness occurs when distributors re-
ceive unfair information and interpersonal treatment from partners
during the enactment of channel procedures and operations (Luo,
Liu, Yang, Maksimov, & Hou, 2015).
In this study, we focus on the direct and moderating effects of three
dimensions of unfairness on opportunism for the following reasons.
First, several studies have highlighted the differential impacts of three
dimensions of fairness on channel relationships (e.g., Kumar et al.,
1995; Liu, Huang, Luo, & Zhao, 2012). Similarly, we expect that three di-
mensions of unfairness will have differential impacts on distributor op-
portunism. Furthermore, recent research suggests that when a
specific unfairness dimension (i.e., distributive) constrains channel
relationships, focusing on other unfairness dimensions (i.e., proce-
dural and interactional) will not significantly address channel prob-
lems (Narasimhan, Narayanan, & Srinivasan, 2013). It is thus
important to examine individual effects of all three unfairness di-
mensions on distributor behaviors rather than focusing on overall
unfairness. Second, a key objective of this study is to understand
how the three unfairness dimensions interact with TCE exchange
hazards and influence opportunism. It is thus necessary to under-
stand how differently each unfairness dimension interacts with and
Please cite this article as: Trada, S., & Goyal, V., The dual effects of perceived unfairness on opportunism in channel relationships, Industrial Mar-
keting Management (2017), http://dx.doi.org/10.1016/j.indmarman.2017.01.008
3
shapes distributor behavior to propose a customized governance
mechanism. We now discuss the direct effects of the three unfairness
dimensions on distributor opportunism.
2.2.1. Distributive unfairness and distributor opportunism
Distributive unfairness refers to the degree to which distributors
perceive the distribution of rewards as unfair or disproportionate rela-
tive to their efforts (Greenberg, 1990; Kumar et al., 1995). According
to equity theory, distributors often compare their gains to other refer-
ents in relationships that shape their perceptions of fairness or unfair-
ness (Adams, 1965; Samaha et al., 2011). Perceptions of distributive
unfairness can increase distress and hostility towards the unfair suppli-
er and can motivate them to restore equity in relationships (Kaufmann
& Stern, 1988; Kumar et al., 1995). Therefore, distributor equity can be
regained by behaving in a self-interested manner. For example, distrib-
utors may limit sales of the unfair supplier's products, misrepresent
products with high prices, create unnecessary stock outs, and allocate
more resources to the promotion of competitor brands with high mar-
gins. Drawing from these arguments, we expect that distributors will
engage in higher degrees of opportunism to respond distributive unfair-
ness from a supplier. Furthermore, degrees of distress and hostility dis-
tributors feel and their resolve to act opportunistically should depend
on the magnitude of distributive unfairness (Greenberg, 1982). There-
fore, as perceptions of distributive unfairness increase, distributors
will resort to more opportunistic behaviors. Thus, we propose the
following:
H1: Supplier distributive unfairness is positively related to distributor
opportunism.
2.2.2. Procedural unfairness and distributor opportunism
Procedural unfairness refers to a distributor's perceptions of partial-
ity and injustice in supplier decision-making and resource allocation
(Kumar et al., 1995). High levels of procedural unfairness spur doubts
among distributors that a supplier will not provide them with fair op-
portunities to express their concerns and will not seek their input on
important decisions (Kumar et al., 1995; Luo et al., 2015). Procedural
unfairness also reflects the ambiguities of a system and signals that dis-
tributors will not be treated fairly (Brown et al., 2006). As a result, it can
destroy the relational bond between suppliers and distributors and can
generate a great sense of dissatisfaction and resentment towards unfair
suppliers (Griffith et al., 2006; Kashyap & Sivadas, 2012). Furthermore,
procedural unfairness can engender fears among distributors that
their long-term interests will not be protected in such relationships
(Luo et al., 2015). Therefore, distributors may be inclined to engage in
opportunistic behaviors to protect their interests and to compensate
for potential losses. For example, distributors may engage in territory
infringement to generate additional sales and to withhold retailer in-
centives offered by suppliers to even out losses suffered due to proce-
dural unfairness. Thus, we propose the following:
H2: Supplier procedural unfairness is positively related to distributor
opportunism.
2.2.3. Interactional unfairness and distributor opportunism
Interactional unfairness is associated with the interpersonal side of
supplier-distributor interactions (Luo, 2007). It emphasizes the human
aspects of interactions and represents the degree to which distributors
are treated with politeness, dignity, and respect during the enactment
of channel procedures (Kashyap & Sivadas, 2012). Perceptions of high
levels of interactional unfairness can discourage mutual understanding
(Narasimhan et al., 2013), disrupt business communications (Luo et
al., 2015), and limit collaboration (Luo, 2007) between suppliers and
distributors. As a result, supplier's interactional unfairness may severely
damage relational bonds and demotivate distributors from maintaining
4 S. Trada, V. Goyal / Industrial Marketing Management xxx (2017) xxx–xxx
such relationship (Kashyap & Sivadas, 2012). Under such circumstances,
distributors are more likely to engage in opportunistic behaviors to re-
ciprocate the supplier's unfair inter-personal treatment (Jones, 2009).
For example, they may not provide critical sales information to a suppli-
er, may reduce order sizes intentionally or may avoid business-related
interactions with a supplier. Therefore, we hypothesize the following:
H3: Supplier interactional unfairness is positively related to distributor
opportunism.
2.3. TCE exchange hazards as drivers of opportunism
Transaction cost economics (TCE) primarily refers to governance de-
cisions made in inter-firm relationships. It proposes two key gover-
nance mechanisms i.e., market and hierarchy, (Williamson, 1975). The
main objective of these governance mechanisms is to limit opportunism
and to enhance exchange efficiency (Williamson, 1975). According to
TCE, three forms of exchange specific hazard (relationship specific in-
vestment (RSI), environmental uncertainty (EU), and behavioral uncer-
tainty (BU)) increase risks of opportunism in exchange relationships
(Rindfleisch & Heide, 1997; Williamson, 1975).
Relationship specific investments represent the specialized in-
vestments that have limited value outside of a focal relationship
(Liu, Liu, & Li, 2014). Suppliers invest in channel relationships of var-
ious forms (e.g., physical facilities, information technologies, and
employee training) to increase channel outcomes and reduce trans-
action costs (Brown et al., 2000; Liu et al., 2014). Such investments
reveal suppliers' positive intensions towards a distributor and im-
prove channel relationships (Rokkan, Heide, & Wathne, 2003). How-
ever, the value of a supplier's RSIs is substantially reduced when a
relationship is terminated; therefore, suppliers' investments in
such assets create locked-in relationships (Bello & Gilliland, 1997;
Ganesan, 1994). Such a locked-in relationship with a supplier
resulting from higher RSIs renders the supplier more vulnerable to
distributor opportunism and leads to the safeguarding of invest-
ments (Wang, Li, Ross, & Craighead, 2013).
Environmental uncertainty refers to a supplier's inability to predict
changes in the external environment (Ganesan, 1994). For example,
shifts in market trends due to frequent changes in customer tastes and
preferences or due to severe competition decrease a supplier's ability
to forecast future contingencies (Bello & Gilliland, 1997; Kumar et al.,
1995). Therefore, high levels of environmental uncertainty along with
bounded rationality make it difficult for a supplier to draft a complete
contract ahead of time, creating adaptation problems (Rindfleisch &
Heide, 1997). These adaptation problems are more frequently experi-
enced by suppliers in emerging markets due to high levels of market un-
certainty (Liu et al., 2009) that create opportunities for distributors to
interpret vague contingencies in their own favor or to shirk their re-
sponsibilities (Bello & Gilliland, 1997).
Behavioral uncertainty refers to the challenges faced by suppliers
when assessing the performance of distributors or a distributor's com-
pliance with a contractual agreement (Rindfleisch & Heide, 1997)
(e.g., difficulties related to assessing product or service standards or
quality levels after sales are made). TCE suggests that suppliers' inabil-
ities to ascertain distributors' actions should increase information
asymmetries in such exchanges and should further limit abilities to de-
tect distributor opportunism (Wathne & Heide, 2000; Williamson,
1975). A lack of effective information infrastructure in emerging mar-
kets aggravates this problem further (Sharma & Nair, 2012). Agency
theory also suggests that information asymmetry along with perfor-
mance evaluation difficulties should increase the chances that distribu-
tors will shirk their responsibilities (Rindfleisch & Heide, 1997).
In sum, exchange hazards such as supplier RSIs, EU, and BU lead to
safeguarding, adaptation, and performance measurement problems
and encourage opportunism. To address these problems, TCE suggests
Please cite this article as: Trada, S., & Goyal, V., The dual effects of perceived unfairness on opportunism in channel relationships, Industrial Mar-
keting Management (2017), http://dx.doi.org/10.1016/j.indmarman.2017.01.008
hierarchical governance over markets through the better control and
coordination of exchanges (Williamson, 1985). In this section, we
focus on direct impacts of three exchange hazards on distributor oppor-
tunism. However, these relationships have been extensively tested in
the extant literature and have been consistently found to have a positive
relationship with opportunism (see meta-analyses by Crosno &
Dahlstrom, 2008; Rindfleisch & Heide, 1997). Therefore, in our study,
we do not explicitly hypothesize a positive relationship between ex-
change hazards and distributors opportunism. However, we test these
positive relationships because our moderating hypotheses (H4, H5,
and H6) are dependent on these direct relationships.
2.4. Interactions between TCE and unfairness dimensions
To this point, we have focused on the direct effects of unfairness di-
mensions and exchange hazards on distributor opportunism. However,
recent research suggests that these unfairness dimensions and “ex-
change hazards” may interact and shape distributor behaviors (Crosno
& Dahlstrom, 2011). We thus now turn to its interactions and examine
its joint effects on distributor opportunism.
2.4.1. Moderating effects of perceived unfairness on the relationship be-
tween supplier RSIs and distributor opportunism
The relationship between supplier RSIs and distributor opportunism
is dictated by two opposing effects, i.e., bonding and expropriation ef-
fects (Rokkan et al., 2003). When distributors perceive high levels of un-
fairness, they are likely to experience intense distress and anger
towards the unfair supplier and to harbor doubts about their motives
(Kaufmann & Stern, 1988; Samaha et al., 2011). Under such conditions,
distributors may view a supplier's RSIs as a means to subordinate their
interests, reducing trust in the relationship (Palmatier, Scheer, Evans,
& Arnold, 2008). As a result, perceived unfairness damages the positive
bonding effects of RSIs and may encourage distributor opportunism.
Furthermore, perceived unfairness engenders a strong desire to restore
equity in a relationship and motivates distributors to pursue unilateral
self-interests (Kumar et al., 1995; Samaha et al., 2011). A greater desire
to restore equity can enhance a distributors' propensity to expropriate
more value from the relationship at the cost of the supplier. Therefore,
high levels of perceived unfairness are likely to increase expropriation
effects of the supplier's RSIs and may encourage opportunism. Overall,
perceived unfairness should weaken the bonding effect and enhance
expropriation effects in such relationships. It is thus more likely to ag-
gravate positive effects of the supplier's RSIs on distributor opportun-
ism. Hence, we expect the following:
H4: (a, b, c): Perceived unfairness (distributive, procedural, and interac-
tional) will positively moderate (increase) the effect of supplier RSIs on
distributor opportunism.
2.4.2. Moderating effects of perceived unfairness on the relationship be-
tween environmental uncertainty and distributor opportunism
Under high levels of environmental uncertainty, perceived fairness
strengthens trust between suppliers and distributors and ensures that
suppliers will not exploit distributors under uncertain conditions
(Kashyap & Sivadas, 2012; Kumar et al., 1995). This can cause distribu-
tors to be cooperative as a way to reciprocate positive treatment from a
supplier (Lind, 2001). On the other hand, perceived unfairness can pro-
voke strong feelings of rage and can generate doubts regarding supplier
intentions (Griffith et al., 2006; Samaha et al., 2011). Under high levels
of environmental uncertainty, distributors become more salient about
a supplier's unfairness because of their own experiences with vulnera-
bility (Kumar et al., 1995; Van den Bos, 2001). Therefore, when distrib-
utors detect unfairness in uncertain environments, they attribute
environmental uncertainties to the negative motives of suppliers
(Kumar et al., 1995) rather than to uncontrollable external factors.
 S. Trada, V. Goyal / Industrial Marketing Management xxx (2017) xxx–xxx
This should create hostile channel environments with heightened levels
of distributor distrust of a supplier. This can cause distributors to pursue
their own interests with even more vigor, leading to increased opportu-
nistic behavior (Lind, 2001). Thus, we predict the following:
H5: (a, b, c): Perceived unfairness (distributive, procedural, and interac-
tional) will positively moderate (increase) the effect of environmental
uncertainty on distributor opportunism.
2.4.3. Moderating effects of perceived unfairness on the relationship be-
tween behavioral uncertainty and distributor opportunism
Under high levels of behavioral uncertainty, it is difficult for a suppli-
er to assess the performance of its distributors and their compliance
with contractual agreements (Rindfleisch & Heide, 1997; Wang et al.,
2013). When distributors perceive unfairness under high levels of be-
havioral uncertainty, they are inclined to attribute this to the ulterior
motives of the supplier, as they are trying to maximize unilateral
gains. Therefore, higher levels of perceived unfairness together with be-
havioral uncertainty can aggravate distributor anger and can motivate
them to punish suppliers. Further, under conditions of high behavioral
uncertainty, distributors are motivated to limit information sharing
with an unfair supplier (Frazier, Maltz, Antia, & Rindfleisch, 2009).
This further complicates the supplier's attempts to evaluate distributor
performance levels (Wang et al., 2013). Therefore, embittered by unfair
treatment from a supplier and emboldened by the supplier's inability to
detect and punish opportunistic behavior, distributors are likely to en-
gage heavily in opportunism under conditions of behavioral uncertain-
ty. Thus, we propose the following:
H6: (a, b, c): Perceived unfairness (distributive, procedural, and interac-
tional) will positively moderate (increase) the effect of behavioral un-
certainty on distributor opportunism.
2.5. Distributor opportunism and relationship outcomes
We focus on distributor opportunism as a primary dependent vari-
able. However, such behavior can have strong effects on several rela-
tionship outcomes. Therefore, it is important to examine its effects on
relationship outcomes that are managerially relevant. We focus on
two such relationship outcome variables: distributor relationship per-
formance and supplier governance costs.
2.5.1. Distributor opportunism and relationship performance
Relationship performance is a measure of the economic outcomes of
supplier-distributor relationships (Liu et al., 2009). When a distributor
engages in opportunistic behavior (e.g., breaching contracts, shirking
obligations, and distorting information), the supplier is bound to suffer.
Consequently, the inconvenienced supplier may cease to provide valu-
able information and limit further investment in the relationship (Jap
& Anderson, 2003). This will diminish the distributor's capacities to
apply a collaborative approach to solving channel problems. As a result,
the distributor is likely to miss value-generating opportunities,
compromising the overall value of the relationship (Luo et al., 2015).
Therefore, distributor opportunism is expected to compromise the col-
laborative efforts of both partners, leading to reduced levels of relation-
ship performance. Thus, we posit the following:
H7: Distributor opportunism is negatively related to supplier evalua-
tions of relationship performance.
2.5.2. Distributor opportunism and governance costs
Governance costs refer to supplier expenses associated with main-
taining relationships with distributors (Dahlstrom & Nygaard, 1999).
Suppliers invest resources to safeguard the value created in a relation-
ship and to protect against the unilateral gains of opportunistic
Please cite this article as: Trada, S., & Goyal, V., The dual effects of perceived unfairness on opportunism in channel relationships, Industrial Mar-
keting Management (2017), http://dx.doi.org/10.1016/j.indmarman.2017.01.008
5
distributors (Luo et al., 2015). Such governance investments can in-
crease dramatically when a supplier detects high levels of distributor
opportunism. This may not only decrease the economic value of a rela-
tionship, but it may also deter the future value creation potential of a re-
lationship (Williamson, 1985). Therefore, supplier's perceptions of
distributor opportunism should cause them to engage in more gover-
nance efforts leading to increased governance costs (Wang et al.,
2013). Thus, we hypothesize the following:
H8: Distributor opportunism is positively related to supplier gover-
nance costs.
3. Methodology
3.1. Sample and data collection
To test the proposed hypotheses, we collected matched survey data
from supplier- distributor dyads of the Indian pharmaceutical industry.
This industry serves as a suitable context for our study for the following
reasons. First, the Indian pharmaceutical industry has faced dramatic
transformations over the last two decades, consequently becoming
highly complex (Chittoor, Sarkar, Ray, & Aulakh, 2009). Due to a signif-
icant increase in the number of firms involved, suppliers have made
considerable efforts to capitalize on distribution space, resulting in the
development of multiple distributors of a supplier in a specific territory.
Such practices have altered the business landscape and have led to the
creation of different types of trade practices at the distribution level.
For example, multiple distributors of the same suppliers compete to at-
tract retailers, resulting in stronger distributor marketing efforts and the
use of retail discounts and prolonging credit periods (Sharma & Nair,
2012). Therefore, competition at the distribution level together with
price controls on several drugs adversely affects distributor profit mar-
gins, resulting in distributive unfairness (Langer & Kelkar, 2008). Fur-
ther, due to the proximity of multiple distributors, such distributors
are inclined to compare service levels of the common supplier on vari-
ous parameters (e.g., objection handling, rebates, timely and accurate
information delivery on schemes, and key policy changes). Our discus-
sions with distributors suggest that suppliers are not equally responsive
to all distributors on such issues, creating lower degrees of procedural
and interactional fairness in such relationships. Such complex condi-
tions create challenges for suppliers regarding the management of dis-
tribution channels in India.
Second, Indian pharmaceutical distribution faces several prob-
lems such as a shortage of resources, poor information infrastruc-
ture, diverse customer demands, low levels of channel activity
visibility, and ideal inventories (Sharma & Nair, 2012). Therefore,
pharmaceutical distribution is highly variable in terms of exchange
hazards (RSIs, BU and EU). Further, the main challenge faced by the
pharmaceutical industry is to enhance the efficiency of the distribu-
tion system (Sharma & Nair, 2012). Therefore, situations in which
exchange hazards are more prevalent render this context appropri-
ate for testing our hypotheses.
Finally, each pharmaceutical distributor in India works with 15 to 30
suppliers on average (Langer & Kelkar, 2008), resulting in differing de-
mands from each supplier. For example, suppliers must compete for dis-
tributor resources (e.g., product stocks, marketing efforts, and retail
services with competitors). Under such conditions, supplier governance
practices are critical in shaping distributor behaviors.
We developed a paired questionnaire for the supplier-distributer
dyads following Anderson and Gerbing (1991) recommendations.
First, we identified the scales of the constructs from the existing lit-
erature. Second, we conducted in-depth interviews with five senior
managers and distributors to ensure the validity of the scales in the
pharmaceutical industry. We discussed definitions of each construct,
corresponding items, and each construct's applicability to the study
6 S. Trada, V. Goyal / Industrial Marketing Management xxx (2017) xxx–xxx

topic. Further, we asked the interviewees to suggest modifications of Table A.2

the items to enhance their validity. We modified our measures based Distributor profile.

on their suggestions and finalized them for the next stage. Third, we Variable Group N = 247 Percentage (%)
translated the English questionnaire to the local language for better Age (years) b11 56 23
comprehension among the targeted respondents. We followed 11–15 104 42
Harkness, Villar, and Edwards' (2010) procedure for this translation N15 87 35
where translations from English to the local were carried out by a Size (employees) b6 85 34
6–10 94 38
team. Some questions were modified based on suggestions from
N11 68 28
the review committee to improve the accuracy of the translations. Distributor's association with supplier (years) b6 56 23
Fourth, the final questionnaire was pre-tested with 40 pharmaceuti- 6–10 138 55
cal supplier-distributor dyads to assess the reliability and validity of N10 53 22
the measures used. We analyzed the measurement model using
smart PLS-3 to assess the loading and reliability of each scale. The
loading of each item on the corresponding construct was N 0.5 and on a 7-point Likert scale ranging from “strongly disagree” to “strongly
value of the reliability estimate was N 0 0.7, revealing good reliability agree.” To measure unfairness levels, we focused on distributors' per-
and measure validity. Finally, we developed the questionnaire for the ceptions of supplier unfairness in channel relationships, as this directly
main study by incorporating the few suggestions received during the influences their behaviors towards suppliers. In measuring distributive,
pre-test period. procedural, and interactional unfairness, five-item scales for each con-
We conducted personal interviews for data collection purposes to struct were adapted from Samaha et al. (2011), Kumar et al. (1995),
ensure that the respondents understood the survey items and to facili- and Luo et al. (2015), respectively.
tate access to knowledgeable informants (Sheng, Zhou, & Li, 2011). To In measuring exchange hazards, we rely on suppliers' percep-
collect data from suppliers, we created a list of pharmaceutical suppliers tions regarding levels of investment and environmental and behav-
from the local directory of the Pharmaceutical Association. Then, bound- ioral uncertainty in channel relationships, as they are actively
ary personnel (territory managers or sales officers) from each involved in investment decisions, channel management under con-
shortlisted firm were contacted by telephone to solicit their cooperation ditions of uncertainty, and the performance evaluations of distribu-
and to verify their locations. We consulted boundary personnel as key tors. In measuring suppliers' RSIs, environmental uncertainty, and
informant, as they are expected to be the most knowledgeable of the ex- behavioral uncertainty, six-, five- and five-item scales were adapted
amined relationships (Luo et al., 2015). We personally met with the key from Liu et al. (2014), Ganesan (1994), and Zhou and Poppo (2010),
informants and asked them to provide data on one of their specific dis- respectively. To measure distributor opportunism, relationship per-
tributors in the territory. A specific distributor was differently defined formance, and supplier governance costs, we rely on suppliers' per-
for each supplier (e.g., the smallest or largest distributor, the newest ceptions, as the self-reported measure for these constructs may be
or oldest distributor, and the distributor with highest or lowest purchas- understated by distributors (Crosno & Dahlstrom, 2008). Opportun-
ing volume for the last quarter). This research design was used to min- ism was measured using a six-item scale adapted from Wang et al.
imize supplier selection bias by defining relationships based on (2013), whereas relationship performance and supplier governance
objective measures rather than based on personal relationships. In costs were measured using a 4-item scale adapted from Luo et al.
total, 274 questionnaires were collected from the suppliers, of which (2015) and Dahlstrom and Nygaard (1999).
267 were found to be complete and usable for the next phase of the To account for effects of extraneous variables, we included four con-
study. trol variables. First, we controlled for supplier dependence on distribu-
We then collected data from the other side of the dyad, i.e., distribu- tors, as this can influence supplier tolerance of distributor opportunism
tors. We contacted distributors designated by the suppliers' key infor- (Liu et al., 2014). Second, we controlled for industry competitiveness, as
mants and arranged a time for a visit. Owners, directors or senior this can influence distributors' behaviors towards suppliers (Wang et
managers were selected as key informants from the distributor side, al., 2013). To measure supplier dependence and competitiveness, we
as these personnel are responsible for managing relationships on a adapted a 3-item scale for each construct from Wang et al. (2013).
day-to-day basis and are expected to be knowledgeable about the Third, as the size of a supplier may influence opportunism in channel re-
focal relationship. We personally visited each distributor and asked lationships (Brown et al., 2000), we used the number of employees as a
them to provide information on the focal supplier. We received 256 measure of supplier size. Fourth, relationship duration is an important
matched questionnaires from the distributors, of which 247 were attribute of channel relationships that may influence distributors' atti-
found to be complete and usable for subsequent data analysis. The pro- tudes and behaviors towards suppliers (Ganesan, 1994). We used the
files of the suppliers and distributors are given in Tables A.1 and A.2, number of years of association as a measure of relationship duration.
respectively.

3.2. Measures 3.3. Common method bias

All of the measures used in this study were adopted from the existing Common method bias is a major concern for the validity of percep-
literature. We used a multi-item reflective scale to operationalize all of tual measures-based empirical studies. In this study, we follow the rec-
the constructs except for relationship durations and supplier size, ommendations of Podsakoff et al. (2003) to safeguard against this. We
which are single item constructs. All of the constructs were measured collected data on independent and dependent variables from various
sources, thus eliminating the potential for common method bias. For ex-
ample, perceptions of unfairness were measured from the distributor
Table A.1
side whereas information on exchange hazards and distributor oppor-
Supplier size.
tunism was obtained from the supplier side. We also conducted a global
Variable Group N = 247 Percentage (%) factor analysis of all of the predicting and criterion variables in both
Size (employees) b700 57 23 samples. No single factor emerged from the analysis and no single factor
700–b1500 70 28 accounted for most of the variance in the dependent and independent
1500–b3000 43 18 variables. These measures ensured that common method variance was
N3000 77 31
not a concern in our samples.

Please cite this article as: Trada, S., & Goyal, V., The dual effects of perceived unfairness on opportunism in channel relationships, Industrial Mar-
keting Management (2017), http://dx.doi.org/10.1016/j.indmarman.2017.01.008
 S. Trada, V. Goyal / Industrial Marketing Management xxx (2017) xxx–xxx 7

4. Results supporting H4(a) and H4(b). However, interactional unfairness

We used the partial least square (PLS) approach to test our research
model and hypotheses. The PLS approach is suitable for our model, as it
does not apply stringent assumptions on the distribution of latent vari-
ables and it allows for the analysis of skewed or normal data with obser-
vations that are interrelated (Falk & Miller, 1992). We analyzed our
measurement and structural models simultaneously using Smart PLS-
3 software. To test the significance of the coefficients, we used a
bootstrapping approach with a 5000 resample.
4.1. Measurement model
We used several measures to assess the psychometric properties of
the scales. First, the reliability of the scales was examined using
Cronbach's alpha for all of the measures. The value of Cronbach's
alpha is N0.7 for all of the constructs, denoting high internal consistency.
Second, the convergent validity of the scales was examined by assessing
the factor loadings of each item and the average variance extracted
(AVE) by each construct. All item loadings are statistically significant
and N00.60 (except for one item of the competitiveness scale) with
AVE values for each construct exceeding 0.50. This denotes the high
convergent validity of the scales (see Table A.3). To evaluate discrimi-
nant validity, we compared the square root of AVE for each construct
with inter-construct bivariate correlations between all of the construct
pairs. The square root of AVE for each construct was found to be greater
than inter-correlations for all of the pairs, denoting high discriminant
validity (Fornell & Larcker, 1981) (see Table A.3). The inter-construct
correlation matrix and descriptive statistics of the construct are given
in Table A.3.
4.2. Structural model results
To test our hypotheses, we examined the standardize path coeffi-
cients of structural model 3. The direct effects of distributive (β =
0.35, p b 0.01), procedural (β = 0.15, p b 0.05), and interactional unfair-
ness (β = 0.11, p b 0.05) on distributor opportunism are positive and
significant, supporting H1, H2 and H3. To test the moderation effects
of perceived unfairness, we analyzed the influence of distributive, pro-
cedural, and interactional unfairness on relationships between the
three exchange hazards (i.e., Supplier RSIs, BU, and EU) and distributor
opportunism.
The moderating effects of distributive (β = 0.27, p b 0.01) and pro-
cedural unfairness (β = 0.17, p b 0.01) on the relationship between sup-
plier RSIs and distributor opportunism are significant and positive,
(β = −0.12, p b 0.05) has significant and negative moderating effects
on relationships between RSIs and opportunism, and thus H4(c) is not
supported. This fining is interesting and contrary to hypothesized rela-
tionships. We expect that negative moderating effects of interactional
unfairness are attributable to the fact that high levels of interactional
unfairness likely diminish trust between partners (Kashyap & Sivadas,
2012) and make suppliers more vigilant about distributor behaviors,
specifically under high RSIs. Therefore, suppliers are more likely to mon-
itor their distributors more to safeguard against risks of opportunistic
behavior. Such monitoring from suppliers may diminish ‘expropriation
effects’ of RSIs, leading to reduced levels of distributor opportunism
(Wang et al., 2013).
The moderating effect of distributive (β = 0.09, p b 0.05) and proce-
dural unfairness (β = 0.13, p b 0.05) on the relationship between envi-
ronmental uncertainty and distributor opportunism are significant and
positive, supporting H5(a) and H5(b). However, interactional unfair-
ness (β = − 0.08, n.s.) has negative and non-significant moderating
effects on relationships between environmental uncertainty and oppor-
tunism. This may be attributed to the fact that interactional unfairness
can enrage distributors. However, this can subside when such supplier
behaviors are ascribed it to uncontrollable circumstances (e.g., environ-
mental uncertainty). For example, when distributors assume that inter-
actional unfairness occurs when inaccurate information is spread under
high levels of environmental uncertainty, they may not become angry
with suppliers. Consequently, distributors may not resort to unilateral
self-interest seeking behaviors with the expectation of future joint
benefits.
The moderating effect of interactional unfairness (β = 0.16,
p b 0.01) on relationships between behavioral uncertainty and dis-
tributor opportunism is significant and positive, supporting H6(c).
However, distributive (β = − 0.05, n.s.), and procedural unfairness
(β = − 0.07, n.s.) show non-significant and negative moderating ef-
fects on relationships between behavioral uncertainty and oppor-
tunism, and thus H6(a) and H6(b) are not supported. This non-
significant and negative effect of distributive and procedural unfair-
ness may be due to the critical role of information in assessing dis-
tributor performance. Under high levels of behavioral uncertainty,
when distributors face distributive and procedural unfairness, they
may attribute this to the complex nature of channel activities and
to complexities of performance evaluations rather than to suppliers'
ulterior motives. As a result, distributors may believe that the per-
ceived unfairness simply constitutes a misunderstanding on their
part and may give the benefit of doubt to a given supplier. Further-
more, distributors may expect that such unfair treatment should

Table A.3
Descriptive statistics and Pearson correlation matrix.

Constructs Mean S.D. 1 2 3 4 5 6 7 8 9 10 11 12

1. Opportunism 3.74 1.44 (0.83)

2. Distributive unfairness 4.03 1.46 0.48⁎⁎ (0.85)
3. Procedural unfairness 2.92 1.07 0.11+ −0.12+ (0.80)
4. Interactional unfairness 3.31 1.12 0.31⁎⁎ 0.19⁎⁎ 0.06 (0.81)
5. Supplier RSIs 4.22 1.33 0.30⁎⁎ 0.29⁎⁎ 0.02 0.02 (0.79)
6. Environmental uncertainty 4.43 1.13 0.41⁎⁎ 0.36⁎⁎ 0.10+ 0.26⁎⁎ 0.18⁎⁎ (0.78)
7. Behavioral uncertainty 3.97 1.29 0.25⁎⁎ 0.17⁎ 0.21⁎⁎ −0.20⁎⁎ 0.06 0.13⁎ (0.82)
8. Relationship performance 4.34 1.43 −0.39⁎⁎ −0.28⁎⁎ −0.10 −0.15⁎ −0.23⁎⁎ −0.27⁎⁎ −0.12⁎ (0.83)
9. Governance cost 4.40 1.34 0.33⁎⁎ 0.22⁎⁎ 0.02 0.03 0.25⁎⁎ 0.21⁎⁎ 0.23⁎⁎ −0.43⁎⁎ (0.84)
10. Supplier dependence 3.98 1.39 0.13⁎ 0.04 −0.03 −0.01 0.04 0.19⁎⁎ 0.04 −0.11+ 0.04 (0.90)
11. Competitive intensity 4.84 1.28 0.03 0.01 0.05 0.03 −0.08 −0.03 0.02 0.03 −0.04 −0.05 (0.92)
12. Supplier size 2595 3207 0.02 0.06 0.04 0.07 0.09 −0.06 −0.05 0.01 −0.08 0.02 −0.02 –
13. Relationship duration 8.45 4.53 −0.03 −0.03 −0.02 0.13⁎ 0.05 0.05 −0.05 0.02 −0.09 −0.10+ −0.01 0.17⁎
Cronbach's alpha 0.91 0.90 0.88 0.87 0.89 0.85 0.88 0.85 0.86 0.89 0.85
AVE 0.70 0.73 0.65 0.66 0.63 0.62 0.68 0.70 0.71 0.81 0.86

Notes: S.D.: standard deviation, AVE: average variance extracted. Numbers in parentheses denote the square root of the AVE value. n = 247.
⁎⁎ Correlation is significant at the 0.01 level.
⁎ Correlation is significant at the 0.05 level.
+
Correlation is significant at the 0.10 level (two-tailed).

Please cite this article as: Trada, S., & Goyal, V., The dual effects of perceived unfairness on opportunism in channel relationships, Industrial Mar-
keting Management (2017), http://dx.doi.org/10.1016/j.indmarman.2017.01.008
8 S. Trada, V. Goyal / Industrial Marketing Management xxx (2017) xxx–xxx

not occur in the future and may continue to cooperate with the
supplier.
Finally, distributor opportunism has significant and negative effects
on relationship performance (β = −0.39, p b 0.01) and positive and sig-
nificant effects on governance cost (β = 0.35, p b 0.01), thus supporting
H7 and H8. Overall, our model explains a significant amount of variance
in predicting distributor opportunism (adjusted R2 = 0.57). Further-
more, a standardized root mean square residual (SRMR) value of 0.04
was found, revealing a robust model fit (Hu & Bentler, 1998). Detailed
results of the structural model are presented in Table A.4, and significant
moderating relationships are graphically presented in appendix (Figs.
A.2–A.7). Fig. A.2. Moderating effect of DU on the relationships between SRSIs and opportunism.

5. Discussion and conclusions
5.1. Summary of results
Research on distribution channels has recognized the need for
multi-theoretical approaches to the study of channel relationships
(Palmatier, Dant, & Grewal, 2007). We have focused on the joint in-
fluence of economic and social forces on distributor opportunism.
Drawing from transaction cost economics (Williamson, 1975) and
justice theory (Adams, 1965), we developed an integrated research
model for distributor opportunism. We examined the two-fold
effects of perceived unfairness on opportunism, i.e., (1) the direct
impacts of the distributor's perceived unfairness (distributive, pro-
cedural, and interactional) on their opportunistic behaviors and (2)
the indirect effects of perceived unfairness on relationships between
opportunism and its economic drivers (supplier RSIs, EU, and BU).
Through detailed empirical analyses on data from 247 supplier-dis-
tributor dyads in pharmaceuticals distribution channels in India,
we have demonstrated that perceived unfairness not only increases
distributor opportunism directly but also aggravates positive
relationships between the three forms of exchange hazard and op-
portunism (Fig. A.8).
This study presents four major findings. First, our comprehensive
research model shows that three dimensions of unfairness directly
motivate distributors to engage in opportunistic behavior and indi-
rectly aggravate positive impacts of exchange hazards on opportun-
ism. These results are critical, as they unambiguously prove the
importance of social aspects (i.e., unfairness) of channel manage-
ment in India that often shape the economic behaviors (i.e., oppor-
tunism) of distributors. Second, this study shows that distributive
unfairness has relatively stronger effects on distributor opportunism
than procedural and interactional unfairness. This suggests that dis-
tributors are more explicitly involved in the calculation of gains or
losses in channel outcomes and respond more severely to distribu-
tive unfairness. Third, the results suggest that three forms of unfair-
ness have different effects on the opportunistic behaviors of
distributors under different channel conditions. Distributive and
procedural unfairness significantly increase distributor opportunism
with high supplier RSIs or environmental uncertainty, whereas in-
teractional unfairness increases opportunism under high levels of

Table A.4
Structural model results.⁎⁎, ⁎

DV: opportunism DV: opportunism DV: opportunism

Key IV (Model 1: baseline) (SPC) (Model 2: direct effects) (SPC) (Model 3: interaction effects) (SPC) Results

Distributive unfairness (DU) 0.30⁎⁎ 0.35⁎⁎ H1 Supported

Procedural unfairness (PU) 0.10⁎ 0.15⁎ H2 Supported
Interactional unfairness (IU) 0.24⁎⁎ 0.11⁎ H3 Supported
Supplier RSIs (SRSI) 0.17⁎ 0.18⁎⁎
Environmental uncertainty (EU) 0.16⁎ 0.20⁎⁎
Behavioral uncertainty (BU) 0.19⁎⁎ 0.23⁎⁎
Interactions
SRSIs ∗ DU 0.27⁎⁎ H4(a) Supported
SRSIs ∗ PU 0.17⁎⁎ H4(b) Supported
SRSIs ∗ IU −0.12⁎ H4(c) Not supported
EU ∗ DU 0.09⁎ H5(a) Supported
EU ∗ PU 0.13⁎ H5(b) Supported
EU ∗ IU −0.08 H5(c) Not supported
BU ∗ DU −0.05 H6(a) Not supported
BU ∗ PU −0.07 H6(b) Not supported
BU ∗ IU 0.16⁎⁎ H6(c) Supported
Control variables
Supplier dependence 0.13⁎ 0.08 0.07
Competitive intensity 0.08 0.05 0.02
Relationship duration −0.03 −0.05 −0.01
Supplier size 0.03 −0.01 −0.01

DV: relationship performance DV: relationship performance DV: relationship performance

Opportunism −0.39⁎⁎ −0.39⁎⁎ −0.39⁎⁎ H7 Supported

DV: governance cost DV: governance cost DV: governance cost

Opportunism 0.35⁎⁎ 0.35⁎⁎ 0.35⁎⁎ H8 Supported
Model robustness
Adjusted R2 0.01 0.40 0.57
SRMR 0.05 0.04 0.04

Notes: SRMR: standardized root mean square residual. IV: independent variables, DV: dependent variables, SPC: standardized path coefficient.
⁎⁎ p b 0.01.
⁎ p b 0.05 (two-tailed test).

Please cite this article as: Trada, S., & Goyal, V., The dual effects of perceived unfairness on opportunism in channel relationships, Industrial Mar-
keting Management (2017), http://dx.doi.org/10.1016/j.indmarman.2017.01.008
 S. Trada, V. Goyal / Industrial Marketing Management xxx (2017) xxx–xxx
Fig. A.3. Moderating effect of PU on the relationships between SRSIs and opportunism.
behavioral uncertainty. These findings clearly show that when man-
aging exchange hazards and resulting opportunism, it is central to
focus on the specific form of unfairness that is constraining a given
situation. Finally, our results show that distributor opportunism sig-
nificantly erodes relationship performance and substantially in-
creases suppliers' governance costs.
These findings are consistent with the prior literature in suggest-
ing that social forces are critical when governing inter-firm relation-
ships and they complement economic forces in explaining exchange
partner behavior. Gathered from an emerging market context, these
findings enrich our overall understanding of relationship manage-
ment in distribution channels. However, researchers should be care-
ful when directly applying these results to developed markets due to
the potentially different roles and manifestations of social forces in
such contexts.
5.2. Theoretical implications
This study makes several theoretical contributions to the marketing
literature. First, it contributes to the TCE and relationships marketing lit-
erature by investigating dual effects of perceived unfairness on distrib-
utor opportunism. Traditionally, TCE posits that three exchange hazards
such as supplier RSIs, BU, and EU create safeguarding, performance
evaluation, and adaptation problems and increase risks of opportunism
in channel relationships (Rindfleisch & Heide, 1997). Our results sug-
gest that in addition to exchange hazards, perceived unfairness, a social
force, directly increases opportunism and indirectly aggravates the pos-
itive impacts of these exchange hazards on distributor opportunism.
Therefore, in a setting where exchange hazards are severe, understand-
ing the new social drivers of opportunism is helpful when developing
collaborative relationships in distribution channels.
Second, this study contributes to the fairness/unfairness research
by uncovering the relative importance of three dimensions of unfair-
ness (i.e., distributive, procedural and interactional) for opportun-
ism in distribution channel relationships. Our findings suggest that
overall (i.e., direct and moderating) distributive unfairness has the
strongest effects on exchange partner opportunism relative to
Fig. A.4. Moderating effect of IU on the relationships between SRSIs and opportunism.
Please cite this article as: Trada, S., & Goyal, V., The dual effects of perceived unfairness on opportunism in channel relationships, Industrial Mar-
keting Management (2017), http://dx.doi.org/10.1016/j.indmarman.2017.01.008
9
Fig. A.5. Moderating effect of DU on the relationships between EU and opportunism.
procedural and interactional unfairness. Following several fairness
studies on inter-organizational settings, Zaefarian et al. (2016) sug-
gested that distributive fairness has the strongest effects on relation-
ship quality, and Crosno and Dahlstrom (2011) argued that
distributive unfairness is most important when considering the im-
pacts of exchange hazards on channel outcomes. Our findings largely
confirm these claims and present further empirical evidence from In-
dian pharmaceutical distribution channels. These channels run on
very low profit margins that make distributors more perceptive
about distributive unfairness, in turn motivating them to respond as-
tutely to anticipated losses.
Third, it contributes to the growing literature on inter-firm gover-
nance by investigating the moderating effects of three dimensions of
unfairness on relationships between exchange hazards and opportun-
ism in Indian distribution channels. The existing inter-firm governance
literature recognizes the importance of social forces in emerging mar-
kets and emphasizes the role of trust and informal norms in managing
opportunism (Yang et al., 2011; Zhou, Zhang, Zhuang, & Zhou, 2015).
Our findings complement this literature by presenting new social
means to limit opportunism and they further reveal that social forces
such as the three dimensions of unfairness have varying effects under
different channel conditions. For example, our results show that when
suppliers have high RSIs or face higher levels of environmental uncer-
tainty, focusing more on distributive and procedural fairness should sig-
nificantly limit distributor opportunism. Similarly, under high levels of
behavioral uncertainty, focusing on interactional fairness should reduce
risks of opportunism in channel relationships. It is thus essential to un-
derstand specific channel circumstances needed to adopt a customized
social approach to the management of channel relationships.
Fourth, our study incorporates two distinct theoretical perspectives
(i.e., justice theory and TCE perspectives) in a single theoretical frame-
work and expands the literature on opportunism and unfairness by
drawing out their interplays in channel relationships. We reveal the
combined role of economic and social forces in explaining exchange
partners' behaviors (opportunism) in inter-firm relationships (Wang
et al., 2013). Our integrative approach responds to the call for more re-
search on opportunism by synthesizing different theoretical domains
(Crosno & Dahlstrom, 2008).
Fig. A.6. Moderating effect of PU on the relationships between EU and opportunism.
10 S. Trada, V. Goyal / Industrial Marketing Management xxx (2017) xxx–xxx
Fig. A.7. Moderating effect of IU on the relationships between BU and opportunism.
5.3. Managerial implications
This study presents three major implications for channel man-
agers. First, as informal norms are especially important in channel
relationships in emerging markets, our findings show that the in-
fringement of norms such as fairness can spur intense negative emo-
tional responses and can create hostile channel climates that can
encourage distributor opportunism. Therefore, channel managers
aiming to limit such behaviors in distribution channels should invest
in channel practices and policies that augment perception of fairness.
Further, our results suggest that three dimensions of unfairness have
different effects on distributor opportunism under specific channel
circumstances. Therefore, we provide support for the notion that
channel contexts and social forces (and specifically the three dimen-
sions of unfairness) must be considered in any discussion of channel
governance to generate distinct results in terms of direct and indirect
effects on distributor behaviors and on consequent relationship
outcomes.
Second, our results uncover the dual effects of perceived unfair-
ness on distributor opportunism. We suggest that when channel
managers face both exchange hazards and perceived unfairness in
channel relationships, they must actively address issues of perceived
unfairness first, as it has direct and leveraging effects on distributor
opportunism. The dual effects of perceived unfairness highlight the
specific importance of social cultures in preserving channel relation-
ships and therefore offer useful insight for managers devising long-
term channel strategies. In addition, our study proves the relative
importance of the three dimensions of perceived unfairness in
Fig. A.8. Research model with a summary of the hypotheses.
Please cite this article as: Trada, S., & Goyal, V., The dual effects of perceived unfairness on opportunism in channel relationships, Industrial Mar-
keting Management (2017), http://dx.doi.org/10.1016/j.indmarman.2017.01.008
explaining distributor opportunism. This finding is of considerable
importance to channel managers, as it can guide them when making
appropriate resource allocation decisions and more so when distrib-
utors view suppliers as unfair on multiple dimensions simultaneous-
ly. Our findings suggest that distributive unfairness has the strongest
effects on opportunism followed by procedural and interaction un-
fairness. Therefore, managers should be careful when managing out-
come allocation with distributors. These results are in line with our
informal discussions with distributors carried out at the data collec-
tion phase.
Third, we suggest that channel managers encourage boundary
spanners to form fairness perceptions in distribution channels, as
boundary personnel interactions are critical in shaping distributors'
perceptions of a firm's integrity, policies and overall image. Existing
research suggests that boundary personnel have the capacities to
adopt cultural norms and to modify their interactions from formali-
zation to socialization to promote harmony and personal bonding
with distributors (Su, Yang, Zhuang, Zhou, & Dou, 2009). However,
various channel practices and policies can be viewed as unfair by dis-
tributors based on their individual circumstances or changing chan-
nel contexts. Therefore, when boundary personnel are sensitized and
trained about the importance of socialization for addressing percep-
tions of unfairness, channel managers can greatly mitigate the ill ef-
fects of opportunism on channel relationships. This can be done by
encouraging boundary spanners to increase the frequency of infor-
mal meetings held with distributors to encourage social cultural
norms and to resolve any misunderstandings regarding reward dis-
tribution or policy changes in channel operations.
These implications will be of special interest to scholars in emerg-
ing markets such as India, China, and Brazil. Exchanges in these mar-
kets are primarily based on informal norms and on principles of
reciprocity (Paul et al., 2006; Sharma et al., 2006). Supplier unfair-
ness strongly violates these cultural norms and motivates distribu-
tors not only to compensate their losses through unilateral gain but
also to leverage other vulnerabilities (i.e., exchange hazards) to re-
ciprocate unfair treatment and to restore equity. However, supplier
fairness helps limit opportunism by cultivating equity norms and
by maintaining harmony through equitable rewards, transparent
policies and effective communication in channel relationships. Fur-
thermore, supplier fairness policies help nurture informal reciprocal
cultures and motivate distributors to focus on mutual benefits and
long-term relationships rather than on maintaining a parochial
focus on short-term benefits.
 S. Trada, V. Goyal / Industrial Marketing Management xxx (2017) xxx–xxx
5.4. Limitations and avenues for future research
This study presents limitations and several avenues for future
research. First, we examined the influence of perceived unfairness on
opportunism in dyadic channel relationships. However, network stud-
ies show that distributors are often embedded in a broader network
that can shape their opportunism towards a focal supplier (Liu et al.,
2014). Therefore, future studies may examine how perceived unfairness
with one distributor affects the behavior of other partners in a channel
network.
Second, the TCE perspective suggests that exchange partners behave
opportunistically whenever profitable and feasible (Williamson, 1985).
However, role theory (Heide & Wathne, 2006) suggests that distributors
perform one of two roles i.e., businessperson or friend, in relationships
that essentially shape their behavior. The businessperson's role focuses
on utility maximization and personal interests whereas the friend's role
follows the informal rules of relationships. Therefore, it would be inter-
esting to investigate how these two roles interact with exchange haz-
ards to determine distributors' resulting behaviors.
Third, we have examined the impact of perceived unfairness and
exchange hazards on opportunism and have not differentiated be-
tween two types of opportunism, i.e., strong and weak. Strong
forms of opportunism violate formal contracts between exchange
partners whereas weak forms of opportunism breach social con-
tracts (Liu et al., 2014). Future research may examine the varying ef-
fects of exchange hazards and perceived unfairness on strong and
weak forms of opportunism.
Fourth, this study has presented important findings based on data
collected from supplier-distributor dyads in Indian pharmaceutical dis-
tribution channels. Similar studies could involve collecting data from
other countries to enhance the generalizability of our findings. Finally,
we did not focus on the number of suppliers and distributors involved
(e.g., small or large) and how this may shape relationships between per-
ceived unfairness and opportunism, revealing another avenue for future
research on distribution channels.
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