Market sanctions, monitoring and vertical coordination within retailer‐manufacturer relationships

This paper investigates the determinants of retailers’ product monitoring intensity within retail brand trading relationships. Drawing on the transaction cost and power literatures, it proposes that retailers trade‐off monitoring intensity against market orientated sanctions to protect against supplier opportunism. Based on a survey of 55 food manufacturers, the findings demonstrate that retailers’ product‐related monitoring intensity is positively related to the retailer's strategic use of retail brands, positively related to the manufacturer's specific investments in the relationship with the retailer, but negatively related to the retailer's ability to impose market‐orientated sanctions on the manufacturer.