The traders' dilemma: The adverse consequences of superior performance in mediated exchanges

Manufacturers entering new foreign markets may opt to outsource their exporting activities to a specialist intermediary. In this study, evidence is provided establishing that the link between manufacturers' perceptions of intermediary performance and the likelihood of their terminating the arrangement is U-shaped. In doing so, this study demonstrates the existence of the so-called 'traders' dilemma' which refers to the increased risk of termination arising from superior intermediary performance. Based on data collected from manufacturer-clients, the findings reveal that the traders' dilemma is robust under varying conditions of exchange uncertainty, cultural distance and relationship age when intermediary performance is measured in terms of stimulating demand.