Principals and their car dealers
Subtitle: what do targets tell about their relation?
By: Jan Bouwens, Eddy Cardinaels, Jingwen Zhang
Contributors: Cardinaels, Eddy, author; Zhang, Jingwen, author; Harvard Business School
Series: Working paper / Harvard Business School -- 14-107; Working paper (Harvard Business School) -- 14-107.
Publisher: Harvard Business School
Published: 2014
Place of publication: Boston]
Language: eng
Number of pages: 46
Description: In this study we describe target setting and target achievements for a car dealership. Car dealers are eligible for a discount on the purchase price conditional on their achieving the sales targets set by the franchisor. We show that car dealers (franchisees) who exclusively deal in cars of the brand offered by the franchisor receive easier targets and are more likely to exert effort in achieving their targets compared to dealers who also acquire brands outside of the franchise network. As a consequence the exclusive dealers receive a relatively bigger cut of the total amount of discounts that dealers are offered conditional on their achieving sales targets set by the franchisor. We explain these results in terms of how much franchisors and franchisees believe that their relations will last or will be intensified in the future. We leverage on relational-contracts theory to develop our predictions and interpret our findings.
Notes: "April 2014" -- Publisher's website.

Includes bibliographical references (page 31).