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Path dependence in personal selling: a meso-analysis of vertical integration

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The authors examine an unusual form of path dependence, in which suppliers that take different decision paths end up in the same position: excessive vertical integration of the personal selling function. They argue that this is the case even though outsourcing is more seriously considered than ever, and economic arguments for outsourcing the sales function are compelling. They develop an institutional explanation at the meso level (a combination of individual, organization, and environmental forces, explicitly considering how these levels combine). This meso-analysis focuses on four forces driving firms toward being locked into employee sales forces. The first force rests on inherent characteristics of the sales function, which is low in inclusiveness and suffers from ambiguous standards of desirable performance. The second force rests on the interplay between one motivated individual, the director of sales, who has inordinate decision-making influence, and the rest of the organization, which is motivated to accept the sales director's recommendations without sufficient challenge. The third force is a set of three path-dependence mechanisms: legitimacy, need for a critical mass, and asymmetric switching costs between governance modes. The last force rests on characteristics of the institution of outsourcing sales. The authors enumerate and classify these mechanisms, illustrating them with a simple simulation of how outsourcing sales becomes rare. They close with testable propositions about which firms are most likely to break their dependence on a vertically integrated path.

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