The Power of Innovativeness in Manufacturer–Retailer Relationships

Purpose: Retailers often challenge manufacturers through aggressive
store brand policies and severe listing constraints. This study investigates manufacturer innovativeness as a managerial lever to shift the power balance between manufacturers and retailers.
Methodology/approach: Using data from 277 senior managers of Swiss and German consumer goods manufacturers and analyzing these data with structural equation modelling, the authors test hypotheses about the impact of manufacturer innovativeness on manufacturer–retailer relationship characteristics (i.e., retailer dependency, store brand aggressiveness, and listing constraints.
Findings: The study demonstrates that manufacturer innovativeness enhances retailer dependency, which in turn positively affects overall manufacturer performance. This relationship can be explained further: By increasing retailer dependency,manufacturers suppress retailers’ store brand aggressiveness and attenuate retailers’
listing constraints. Store brand aggressiveness affects overall manufacturer Performance through listing constraints. Research implications: Identifying levers such as innovativeness that assist manufacturers
in fostering their power over retailers provides a new mode for understanding how manufacturers can influence the balance of power between manufacturers and retailers. The study provides support for the approach/inhibition theory of power on the inter-organizational level. Organizations with increased power are assumed to have approach-related tendencies and act in goal-consistent manner, whereas
organizations with reduced power are assumed to develop the tendency to pursue inhibition-related actions, e.g., attending to threats. Furthermore, this study identifies channel relationship characteristics such as retailer dependency as a mediating path between manufacturer innovativeness and performance. Practical implications: Managers need to strengthen the firm’s innovative capacity to enhance the performance of their companies. By developing the capability to provide radical innovations, manufacturers are able to enhance their performance not only directly but also indirectly by strengthening the manufacturer’s position with regard to retailers. This study underscores the relevance of innovativeness for strengthening the manufacturer’s position in its relationship with retailers that avoids problems with aggressive store brands and constrained listing conditions.