Relative explanatory power of agency theory and transaction cost analysis in German salesforces

In this paper, we take an integrated view of Transaction Cost Analysis (TCA) and Agency Theory (AT) in order to study the direct salesforce vs. rep decision and the design of compensation plans in German salesforces. We test, with a single data set, a set of established and new hypotheses of both theories in the context of both decisions. This allows us to assess the complementarity of AT and TCA by estimating the relative explanatory power of the two frameworks for each of the two decisions. On the one hand, we find support for most of the established hypotheses. However, the hypothesized effect of uncertainty is rejected in our data set. Moreover, we document the impact of some new variables. We also find that, while AT does not add much to explain the decision of direct vs. rep in our data, TCA is equally limiting in helping understand the design of salesforce compensation plans. Therefore, one has to be cautious in treating AT and TCA as complementary theories. (C) 2004 Elsevier B.V. All rights reserved.