It is a common practice for China’s department stores to lease a portion of their sales floor to local small and medium size independent retailers who market brands and merchandise that complement their store’s merchandise mix. An obvious advantage of such an arrangement is to entice more consumers to visit their store. If the host store and the leased units can leverage each other’s strengths and weaknesses, then both the store and the tenants will be better off than if they were operating independently.

Following social psychology literature, we suggest that Chinese managers differ from their Western counterparts in at least two cultural dimensions: power distance and collectivism/individualism. Chinese cultural traits are characterized by large power distance and collectivism. This is in strong contrast to the developed Western world which is relatively low in power distance and high in individualism. This paper examined the influence strategies used and the outcomes that occurred in horizontal exchange relationships in a high power distance and collectivistic culture. The key research constructs of this study focused on three aspects of power – its determinants, its use and the outcome. The paper tested the applicability of the power, satisfaction, commitment and performance relationships in a developing country channel.  These have been well established in the existing Western literature. 

The notion of harmony is highly valued in Chinese business culture. This is evident from the study findings that there were no significant relationships between contingent use of coercive power on both economic and social satisfaction. This suggested that Chinese channel members behave differently from their Western counterparts in responding to channel partner coercion. Several Western studies have reported that the exercise of coercive power has a direct negative effect on satisfaction. Our divergent finding can be explained by the fact that tenants are more tolerant to coercive influence, because Chinese collectivistic culture places a high value in conducting exchanges in a harmonious manner. However, an absence of resistance from their tenants does not necessarily mean that they agree with the store’s coercive influence. It simply means that they are more tolerable. This suggests that firms should consider using more frequently non-coercive influence, which is more effective in cultivating channel relationship in China. Indeed, the result demonstrated that the contingent use of non-coercive power is positively associated with economic and social satisfaction. This in turn leads to higher levels of commitment and strategic performance of tenants. The findings on satisfaction and commitment concur with most previous research. As more economic benefits flow from the relationship, the tenant becomes more committed and shows a greater willingness to invest further resources into the relationship.

We are aware from earlier research that Chinese channel members are less likely than their American counterparts, in international joint ventures, to voice their complaints to their suppliers when they are dissatisfied with the relationship. These findings showed the subtle difference in channel member behavior between individualistic culture in many Western countries and collectivistic culture in China. This implied that exchange partners should maintain frequent open communications, both formal and informal, in respect to policies, rules, plans and programs. In addition, when exercising coercive influence, the source should communicate clearly to the target the objectives and the rewards that link to expected behavioral outcome. The study also illustrated that the relationships between power, satisfaction, commitment and performance can be generalized in a Chinese context. However, Chinese tenants are more sensitive to the contingent use of non-coercive power on economic satisfaction and social satisfaction, than their Western counterparts. This showed that the established power-satisfaction-commitment-performance framework is applicable to China provided firms exercise power with caution by taking into consideration of the collectivistic cultural context. This study adds to the existing knowledge on channel behavior in a cultural setting – a setting which is very different to the cultural settings of most Western countries. In addition, it tests the degree of cross-cultural generalization of established channel constructs. It also provides managerial insights on channel relationship management in China’s market.