Firms exporting via foreign channel intermediaries, such as import agents or distributors, trade off a lack of control of the foreign channel for a low-risk market entry. Agency theory and transaction cost analysis suggest that a lack of control manifests itself in the foreign channel intermediary (FCI) having opportunities to behave in its own interests, rather than those of the exporter. Even so, management strategies that result in an alignment of the exporter's and FCI's goals are more likely to result in a perception of satisfaction in the relationship than if only one party's goals were met. Such management strategies should commence with an extensive precontractual screening step to find an intermediary whose goals are complementary to those of the exporter. After forming a trading relationship, an exporter can better coordinate the relationship by noncoercive monitoring of the exporter, and reduce the potential for opportunistic behavior and achieve a relationship that performs to the satisfaction to both parties. Greater monitoring is also likely to maintain a state of goal congruence between the parties. Conditions of environmental uncertainty may, however, create difficulties in precontractual screening by the exporter. A conceptual framework explaining the interaction between these variables has been presented, along with nine testable propositions and directions for future research.Amal R. Karunaratna and Lester W. Johnso
