Essays on Business Networks in the Multi-level Marketing Industry

The influence of social factors on individual business behaviors;Individual business networks;Network formation;Inactive behavior (Turnover);the Multi-level Marketing industry;Marketing;Business and Economics;Business Administration

Kim, EunsooSchwartz, Eric Michael ;

University of Michigan

关键词: The influence of social factors on individual business behaviors;    Individual business networks;    Network formation;    Inactive behavior (Turnover);    the Multi-level Marketing industry;    Marketing;    Business and Economics;    Business Administration;   

Others  :  https://deepblue.lib.umich.edu/bitstream/handle/2027.42/138716/eunsoo_1.pdf?sequence=1&isAllowed=y

瑞士|英语

来源: The Illinois Digital Environment for Access to Learning and Scholarship

【 摘 要 】

This dissertation contributes to our knowledge of how social factors (e.g., homophily, the existence of others) influence individual business behaviors. To explore the influence of social factors, the Multi-level Marketing (MLM) Industry is especially suitable because social and business networks are interrelated. MLM is a major type of direct selling wherein Independent Business Owners (IBOs) recruit others, who become IBOs themselves. IBOs in MLM are pivotal because they both serve end-customers and expand and maintain the IBO network. However, as these IBOs are not firm employees, understanding the relationships among them is critical. Two important questions are addressed. How is the IBO network created (Essay One)? How do IBOs influence the activity of other IBOs (Essay Two)?Essay One, ;;Social versus Economic Factors in Business Network Formation: An Empirical Analysis of the Multi-level Marketing Industry,;; explores how IBOs form networks between IBOs and new joiners. Unlike social networks, where relationships are mainly driven by social motives, IBOs and new joiners in MLM also expect economic returns. Thus, I investigate network formation in terms of social and economic factors. Moreover, I investigate how the relationship value between the IBO and the new joiner affects the new joiner;;s future business activities. By employing a structural Bayesian two-sided matching model, I find that both factors significantly affect network formation. However, economic factors are more important than social factors, playing a significant role in determining the network relationship. Also, social factors are significant in forming the network relationship but are less influential driving new joiners to engage in business activities in the future. Finally, new joiners who are driven primarily by economic factors at the formation stage show significantly more business activity. Essay Two, ;;The Impact of Existence of Others on Inactive Behavior in the Multi-level Marketing Industry,;; examines one specific aspect of IBOs;; turnover behavior. There is a vast literature on turnover, yet its main focus is on traditional hierarchical organizations. MLM has a unique industry environment, which suggests that previous findings may not apply. Specifically, relationships among IBOs are highly emphasized; they are often seen as personal, yet competition among IBOs remains despite the importance of coordinating efforts. Given these unique features, I focus on how IBOs;; inactivity can be quantitatively understood in relation to three different dimensions of others (Individual, Network family, and Proximity). One focal aspect is status, which is awarded by MLM firms to successful IBOs to motivate IBOs. Analyzing county-level and individual-level data, I find consistent evidence that being near high status IBOs decreases inactivity --- a protective effect. The results hold true at the network family level and for proximity. Also, IBOs with a larger family tended to stay active. However, having more IBOs in proximity increased inactivity, indicating that competition in proximity seems inevitable. Lastly, neural network is applied to predict inactivity, which reveals a similar conclusion about the role of high status IBOs. These findings have implications for the MLM industry, which has an interest in maintaining the IBO sales force.