EXECUTIVE SUMMARY

Even as contemporary organizations are inexorably driven towards greater strategic aligning and more cooperative, partnership type relationships with their channel partners (as opposed to the erstwhile mindset of seeing these channel partners as potential adversaries), scholars and practitioners are quickly coming to the realization that channel conflicts are not only inevitable but they increasingly help to define the very essence of these relationships.  Moreover, increasingly organizations are coming to recognize that the absence of conflict is not harmony but apathy.  Given this inescapable reality of modern channels, the significant managerial question becomes: How do firms manage to cooperate and coordinate activities in the face of the ever-present potential for conflict to erupt into open disagreement?  To begin to answer this enigmatic question, we need to take a comprehensive, holistic look at how organizations approach/handle conflict management within the context of their relationship.  In order to do so, we must understand and acknowledge three distinct components and their interplay:  (1) ‘shadow of the past’ interactions or antecedent conditions that effect the channel members’ present ability to manage conflict, (2) interactions of members within the working relationship (i.e., nature of communications attempted) and the means adopted by such members to resolve their conflicts (i.e., various conflict resolution processes utilized), and (3) the impact of the latter interactions, and the indirect impact of the ‘shadow of the past’ interactions, on channel performance (conceptualized both in terms of the retained overall post-conflict relational quality and financial health of the working relationship). 

However, there does not appear to be any extant research which has examined the handling and management of conflict by channel partners so comprehensively.  In this project, we empirically evaluate the entire three-component process using data straddling two years.  To ensure temporal separation, we draw the measures of the ‘shadow of the past’ variables from year 1 and those of interaction processes (i.e., communications attempted and conflict resolution behaviors) and the performance measures (i.e., relational sentiments and financial performance) from year 2.  A series of 18 hypotheses are derived and evaluated.  This permits us to evaluate a more dynamic model of conflict, enabling us a deeper insight into causal explanations for good conflict management. 

The data provided support for 14 of these 18 tested hypotheses.  The results demonstrate that to successfully manage conflicts, managers must consider how they approach members at the beginning of a dispute.  The initial orientation (i.e., cooperative versus conflictive) and the control structure in place (i.e., trust-based versus bureaucratic), as this study demonstrates, lay the groundwork for the type of communication (bi-lateral versus unilateral) and conflict behaviors (integrative versus distributive) that members are apt to use to resolve a dispute, all else equal.  Flexible orientations that promote cooperation and sharing of relevant information (bi-lateral communication) promote more integrative conflict resolution behaviors.  However, it must be noted, that these types of behavior (integrative) are time consuming, more risky, and costly.  In contrast, hard-line stands are apt to be less time consuming, and promote less risky behaviors (distributive).  This study did not investigate the issue characteristics associated with specific conflict episodes.  Hence, contingencies that warrant the use of hard-line stands still need to be investigated, and we commend this task to future researchers.  However, over time, these hard-line tactics are likely to reduce members’ ability to successfully achieve goals, and create an environment of hostility and frustration.  Hence, managers must consider where they need to be flexible, and where they might want to make a hard stand.  Each carries its own costs.  While there is nothing intrinsically wrong with taking a hard stand and trying to gain an edge, managers need to ensure it is done fairly.  Being tough in terms of taking a definitive stand, letting other members know how you feel, and asking for concessions can be a good strategy as long as doing so does not damage the very fabric of the relationship.  In this respect, managers must understand the limits of hard-line stands.  Effective relationships will build on the positive and creative energies from interactions, and reduce sources leading to dysfunctional interactions.  In summary, ceteris paribus, normatively speaking, bi-lateral communication strategies and integrative conflict resolution behaviors are to be preferred over unilateral communication strategies and distributive conflict resolution behaviors.  These caveats are reflected in our related hypotheses as well as our empirical results.