Pandoras Box: Does Electronic Commerce Increase the Optimal Amount of Fraud?

Close business relationships are important in the food industry. However, the introduction of electronic commerce has emerged as a fundamental challenge to these relationships. In particular, retailers who start procuring private label food products in electronic auctions risk the termination of the relationships with their suppliers thus losing the value derived from these relationships. Instead, they move their focal interest towards single, unrelated transactions. The authors argue that this development increases the optimal amount of fraud in electronic commerce. In this context, they analyze the occurrence of opportunism.Relationships, information asymmetry, auctions, opportunism, economics of information, Marketing,

Buyer Commitment and Opportunism in the Online Market for IT Services

Companies increasingly outsource IT-related tasks using reverse auction mechanisms embedded into online marketplaces. However, a considerable proportion of auctions at these marketplaces do not result in a contract between buyer and supplier. Extant literature mostly refers to costly bidding and bid evaluation to explain this phenomenon. Another possible explanation is that because of the low entry barriers, buyers with a low commitment to exchange can use the marketplace solely for information gath-ering purposes such as price benchmarking and obtaining free consultations, having little or no intention to contract a supplier. We test this explanation by looking at how different types of costs incurred by the buyer during the sourcing process, are related to the outcome of reverse auctions in terms of contract award. We argue that higher levels of search, preparation and negotiation costs are associated with higher commitment to exchange and find that opportunistic behaviour does indeed play a part in the non-contracted projects, while committed buyers are more likely to enter into a contract with a supplier. The hypotheses are tested on a sample of 2,574 reverse auctions at a leading online marketplace for IT services and further verified across projects of different value and different levels of buyer experience. On the practical side, we recommend setting up entry barriers for buyers with a low level of commitment.IT Outsourcing;Online Markets;Opportunism;Reverse Auctions;Transaction Costs

Leveraging Offshore IT Outsourcing by SMEs through Online Marketplaces

Following their larger counterparts, an increasing number of small firms outsource their IT tasks to lower cost offshore destinations. For small firms, however, offshore outsourcing is a difficult undertaking as it involves high transaction costs. Online marketplaces for IT services, which have recently become available to small firms, make offshore IT outsourcing more accessible and manageable, although differences in the marketplace design result in varying outcomes across the marketplaces. This has consequences for SME’s decision as to which online marketplace to use, because different markets may have different types of benefits and costs. This paper sets to analyze some of the similarities and differences between online marketplaces for IT services and their effects for small firms. First, we analyze if and how online marketplaces reduce small firms’ transaction costs in offshore IT outsourcing. Second, we examine the effects of market entry barriers on outcomes of online marketplaces and their implications for small firms. The results indicate that online marketplaces for IT services do reduce transaction costs for small firms in offshore outsourcing across ten specific market processes. More surprising, however, is the finding that the lower market entry barriers for suppliers result in lower prices for buyers without compromising other aspects of market performance.Offshore IT Outsourcing;Online Market;Process-Stakeholder Analysis;Reverse Auction

Buyer Commitment and Opportunism in the Online Market for IT Services

Companies increasingly outsource IT-related tasks using reverse auction mechanisms embedded into online marketplaces. However, a considerable proportion of auctions at these marketplaces do not result in a contract between buyer and supplier. Extant literature mostly refers to costly bidding and bid evaluation to explain this phenomenon. Another possible explanation is that because of the low entry barriers, buyers with a low commitment to exchange can use the marketplace solely for information gath-ering purposes such as price benchmarking and obtaining free consultations, having little or no intention to contract a supplier. We test this explanation by looking at how different types of costs incurred by the buyer during the sourcing process, are related to the outcome of reverse auctions in terms of contract award. We argue that higher levels of search, preparation and negotiation costs are associated with higher commitment to exchange and find that opportunistic behaviour does indeed play a part in the non-contracted projects, while committed buyers are more likely to enter into a contract with a supplier. The hypotheses are tested on a sample of 2,574 reverse auctions at a leading online marketplace for IT services and further verified across projects of different value and different levels of buyer experience. On the practical side, we recommend setting up entry barriers for buyers with a low level of commitment

Identification and realisation of the benefits of participating in an electronic marketplace : An interpretive evaluation approach

Electronic marketplaces have proliferated as use of the Internet has become widespread in business. A rapid growth in the number of marketplaces, followed by a period of stringent consolidation, as market makers develop a greater understanding of effective business models, has resulted in a climate of uncertainty and confusion. As with many aspects of e-commerce the drive towards participation is fuelled less by strategy planning than by a fear of lagging behind competitors or losing first mover advantage. In this climate of uncertainty organisations often bypass effective evaluation of the benefits that can be realised from participation in e-marketplaces, thereby exacerbating the process facing them and hampering effective decision-making. Evaluation is perceived as a fraught subject within the Information System field, and particularly within the business community which adheres to tried and trusted, albeit often inappropriate, methods such as financial or technical evaluation. The difficulties involved in effective evaluation of systems are well documented; these will increase as systems become more pervasive throughout organisations and those of their trading partners. Calls for a more holistic approach to evaluation are increasing, based on a developing appreciation of interpretive methods of research within the Information Systems discipline. However, the understanding that the social, political and cultural factors affecting and organisation have an impact on the uses and advantages of systems is by no means universal, and empirical evidence of this view is only slowly emerging. This research examines the benefits that can be realised from participation in an electronic marketplace by taking an interpretive approach to the evaluation. It examines the nature of electronic marketplaces to provide clarity to a confused and dynamic environment. The study then focuses on the development of evaluation studies within the IS discipline to identify how an effective evaluation method for assessing the benefits of e-marketplace participation can be achieved. An empirical examination of an organisation’s participation in an electronic marketplace is used to identify the benefits that are realisable and the issues that impact on them. The case study is conducted through an interpretive lens, using a content, context, process (CCP) approach based on existing IS literature. This enables a crucial understanding of the internal and external environments influencing the organisation and its realisation of potential benefits. To allow for the range of interpretations and reflections required to fully address the complexity of the issues involved in such a case study, a variety of research influences such as dialect hermeneutics, critical realism and case study theory are drawn into the research model. The case study organisation’s motivation for participating in an e-marketplace was primarily cost savings. Over the two years of the study, several more potential benefits were identified, such as supply chain efficiencies, greater market awareness and a widening of the supplier base. However, the organisation’s commitments to its local and regional communities, its need to retain status and some consideration of existing relationships needed to be balanced against the gains that might be realised. In some cases the organisation chose to forgo a potential benefit in favour of socially or politically motivated actions. Cultural factors also influenced their actions, particularly as they moved towards extending participation in the marketplace to gain from a global sourcing strategy. The contribution of this research lies in two areas. Firstly, it was existing evaluation literature to development a framework for the evaluation of benefits in the complex area of electronic marketplaces, thereby extending and informing the call for more inclusive and interpretive evaluation studies. Secondly, the research contributes empirical evidence to support the recognition of benefits to be gained from electronic marketplaces and shows how the realisation of the economic benefits is impacted by the social, political and cultural factors that influence an organisation

Selection of planned supply initiatives: the role of senior management expertise

Purpose – The purpose of this paper is to assess the selection of planned supply initiatives and the role of senior management expertise. The drivers that influence the selection of particular supply initiatives by firms are of major interest to both practitioners and academics, as choices indicate priorities for resources, potential performance gaps and needs for future research. Moreover, theory indicates that senior management expertise and firm‐level resources might influence the likelihood of selecting particular initiatives. Design/methodology/approach – A synthesis of the literature supported the development of a five‐dimensional framework of major supply initiatives. Logistic regression was conducted with data from a survey of chief purchasing officers at large North American firms. The impact of firm‐level resources and senior management expertise, including background and experience, was assessed for the selection of supply initiatives. Findings – After controlling for general industry‐level factors, both firm resources and senior management expertise were found to systematically affect the likelihood of a firm planning to pursue particular initiatives. First, hiring senior management from outside the firm decreased the likelihood that network‐based initiatives were planned, while senior management who last worked in supply were found to be negatively related to planned supply strategy initiatives. Second, firms with greater use of e‐business technologies favored additional investment in supply networks. Research limitations/implications – This research focused on large firms in developed countries, and additional research is needed to explore the generalizability to small and medium‐sized enterprises and less‐developed countries. Moreover, additional work is needed to explore trade‐offs between planned and emergent initiatives, as only the former were empirically assessed. Originality/value – Senior management expertise has received relatively little attention in prior research, yet was found to be a significant factor influencing strategic, process and network‐related supply initiatives. Moreover, the framework of supply initiatives provides a basis for assessing and benchmarking firm‐level supply chain strategy and investment patterns. Finally, empirical evidence emerged that both firm and individual‐level factors influenced the probability of selecting particular initiatives

Utilizing e-business technologies in supply chains: The impact of firm characteristics and teams

This paper presents findings from an exploratory study that analyzes the drivers and outcomes of e-business technology use in the supply chain. Using a combination of case studies and survey data from a diverse sample of industries, the research examines how industry context, firm characteristics and firm-level strategic resources, such as purchasing teams, influence the exploitation of e-business technologies and the relationship between e-business technology use and firm performance. Based on a synthesis of related literatures from transaction cost economics and the relational view of the supply chain, a two-dimensional framework for e-business technology is proposed with transactional and relational dimensions. However, empirical analysis indicated that transactional technologies can be further subdivided into two factors: dyadic cooperation and price determination. Significant differences were found between the two dimensions in terms of their overall levels of adoption, with dyadic coordination being the most widely adopted. In addition, the development of strategic resources expanded, in particular internal and customer teams, the use of e-business technologies expanded. Purchasing organizational structure and firm size also were positively related to the adoption of transactional e-business technologies. Finally, of particular importance to practitioners, e-business technologies targeted at reducing dyadic coordination costs lead to improved financial performance