An evolving theory of hybrid distribution: Taming a hostile supply network Jule B. Gassenheimer a, ⁎ , Gary L. Hunter b,1 , Judy A. Siguaw c,2 a Crummer Graduate School of Business, 1000 Holt Ave.-2722, Rollins College, Winter Park, FL 32789-4499, United States b Marketing Department, 332 College of Business Building, Campus Box 5590, Illinois State University, Normal, IL 61790-5590, United States c Cornell Nanyang Institute of Hospitality Management, Nanyang Business School, Nanyang Avenue, Singapore 639798, Singapore Received 1 January 2005; received in revised form 1 December 2005; accepted 1 February 2006 Available online 2 May 2006 Abstract Suppliers attempting to expand markets through hybrid distribution have created a complex, potentially hostile environment that reaches beyond dyads to network relationships. We offer a multi-theoretic paradigm that uses the network, social capital, structural holes and distributive fairness literatures to guide suppliers in the transition of governing hybrid channels so that when markets do overlap, cooperation and competition can effectively co-exist within the supply network. Specifically, we propose that social capital, structural holes, trust, and distributive fairness can be used to govern the effectiveness of cooperation and competition among hybrid channels and yield higher performance within the supply network. A corresponding propositional inventory is offered. © 2006 Elsevier Inc. All rights reserved. Research on the governance of interfirm relationships has recently expanded beyond the supply chain dyad to include the supply network (Golicic, Foggin, & Mentzer, 2003; Heide, 2003; Wathne & Heide, 2004). Andersen and Christensen (2005, p. 1261) state: “Like supply chains, supply networks acknowledge the importance of understanding the production and coordination activities carried out and the interfirm division of labour associated with it. However, rather than focusing on a specific set of actors, supply networks are characterized by sets of purposeful and connected exchange relationships, which may change over time as specific actors are involved, deactivated, or reactivated in the performance of production tasks.” Partially due to competitive pressures, suppliers increasingly use a network of distributors to insure their product reaches potential customers. Suppliers' use of different distributors should improve the market for everyone; suppliers benefit as a result of increased access to customer markets (Sa Vinhas & Anderson, 2005), while distributors gain because of enhanced diversity in product offerings to markets (Tsay & Agrawal, 2004). However, the effect of suppliers' expansion of their distributor networks is that once distinct and separate customer markets now often overlap. Consequently, distributors are likely to be aggravated that their supplier is cooperating with a competitor, resulting in strained relationships between the supplier and its distributors (Sa Vinhas & Anderson, 2005). If the supplier's governance of competing distribution channels is poorly perceived by these parties, the resulting backlash and monitoring inefficiencies can reduce gains (Wathne & Heide, 2000). On the other hand, firms which prove best at managing the relationships within such networks can increase efficiencies while appealing to a number of markets (e.g., Bonner, Kim, & Cavusgil, 2005). Thus, proper governance of network relation- ships involving a supplier and at least two types of distributors competing for overlapping customers can form the basis for competitive advantage. While this nascent research stream in channel networks has contributed to our understanding of the importance of supply network governance in sufficiently reaching and servicing diverse customer segments (Mentzer, DeWitt et al., 2001), the primary focus has been on the relationship between vertical partners. Customers, however, increasingly demand goods and services from a variety of different channels (Alba et al., 1997; Anders, 2000) and suppliers attempt to address these demands Industrial Marketing Management 36 (2007) 604 – 616 ⁎ Corresponding author. Tel.: +1 407 646 2404; fax: +1 407 646 1550. E-mail addresses: gassenheimer@rollins.edu (J.B. Gassenheimer), glhunter@ilstu.edu (G.L. Hunter), judysiguaw@ntu.edu.sg (J.A. Siguaw). 1 Tel.: +1 309 438 7561; fax: +1 309 438 3508. 2 Tel.: +65 6790 6479; fax: +65 6794 1340. 0019-8501/$ - see front matter © 2006 Elsevier Inc. All rights reserved. doi:10.1016/j.indmarman.2006.02.007