The threat-based influence strategy and monitoring arrangements in voluntary retail chains: the conflict and control effects

A Threat-based Influence Strategy (TIS) means that the principal communicates to the agent that negative sanctions will be carried out if the agent fails to perform a desired action. This type of influence is often associated with a high conflict potential. This article presents an empirical study that focuses on the effectiveness of using TIS, given the different levels of monitoring in voluntary retail chains. Specifically, the research explores two complementary scenarios about the effect of TIS on free-riding behaviour: the conflict scenario and the control scenario. If the level of monitoring is low to modest, the TIS lacks credibility and the principal is unable to discriminate between the free riders and the conformers. Hence, the TIS undermines cooperation and increases the level of free riding within the system. When TISs are combined with substantial monitoring, we expect this governance pattern to change significantly. Comprehensive monitoring increases the incentive for compliance in order to avoid punishment, makes the chain's obligations and performance standards clearer and, hence, easier to follow and improves the precision with which the principal can discriminate between the agents that conform to or deviate from their obligations. An empirical study of 79 voluntary retail chains provides support to the proposed hypotheses.