The dark side of channel rewards for observer distributors: A social comparison perspective

Existing research has primarily investigated the bright side of channel rewards, such as gaining distributors’ positive feedback and/or to avoid their negative responses. While acknowledging the potential negative effects of channel rewards, few studies have empirically examined this dark side or clarified its theoretical underpinnings in B2B relationships. By integrating social comparison theory and the channel reward literature, this paper examines the impacts of reward magnitude (of supplier-initiated rewards to a focal distributor) on the opportunism of an unrewarded distributor (i.e., observer), and the extent to which such an effect is contingent upon whether the reward approach is outcome-based or process-based. We test our hypotheses via a two-study, mixed-method empirical design. Study 1 surveys a sample of 304 Chinese distributors from multiple industries, and its findings indicate that reward magnitude increases competition intensity among distributors in the distribution network, which in turn elicits opportunism from observers. The findings of Study 1 also show that a process-based reward approach will strengthen the positive relationship between reward magnitude and competition intensity. Study 2 conducts a scenario-based experiment to examine the causal effects of reward magnitude on observers’ behavioral responses (i.e., competition, opportunism), and its findings fully support the main effects hypotheses. Theoretical and practical implications are discussed based on the research findings.