Governance Mechanisms in Internet-Based Affiliate Marketing Programs in Spain

Internet-based affiliate marketing programs have emerged as one of the fastest-growing methods for online retailers to acquire customers and increase sales by tapping into the power of independent web sites to reach a large, diverse audience of potential customers. However, while these programs have proven effective in increasing website traffic and sales, illegal or inappropriate activities on the part of affiliates could negatively impact a retailer’s brand in the eyes of customers. This study is an exploratory analysis of governance mechanisms (formal contracts, partner selection, incentives and monitoring) in one-to-many affiliate programs in Spain. Agency theory and transaction cost analysis provide the theoretical background. The conclusion is that there is a significant lack of transparency in the guidance and restrictions communicated to affiliates, and a lack of systematic monitoring of affiliate behavior, which increases the risk of opportunism or misconduct. General recommendations for managers of affiliate programs are considered. DOI: 10.4018/978-1-61350-462-8.ch014