Non-contractible Factors as Determinants of Electronic Market Adoption

Newly emerging electronic marketplaces have significant implications for the choice of governance mechanisms used by firms. This paper builds on transaction cost and routine based perspectives in analyzing buyersí decision to use IT-enabled market mechanisms such as reverse auctions. The study argues that buyers are less likely to adopt reverse auctions for products with higher degrees of noncontractibility. A significant contribution of this study lies in operationalizing and validating the concept of noncontractibility as an explanatory variable for predicting buyer adoption of electronic marketplaces. We argue that the notion of noncontractibility addresses the mixed predictions in previous research concerning the impact of IT on firm boundaries as evident in the electronic market and move to the middle hypotheses

A Modl for Assessing Performance in Electronic Marketplaces

Theories of inter-organisational co-ordination propose that information processing capabilities (structure, process and technology) must be aligned with information processing needs (environmental, partnership and task uncertainty) and the fit between both is a strong determinant of performance. Electronic marketplaces dominate new developments in electronic commerce. While traditional models predominantly deal with one-to-one relationships, electronic marketplaces are mainly characterized as being one-to-many and many-to-many in nature. Such developments have meant performance is based on more than just the fit between information processing needs and information processing capabilities. Consequently measuring performance has become much more difficult. From utilising current research the authors develop a theoretical model examining issues such as trust, investment and ownership.The paper details the development of the model and proposes a research strategy for testing it

NON-CONTRACTIBILITY AND ASSET SPECIFICITY IN REVERSE AUCTIONS: “MOVE TO THE MIDDLE ” OR “EFFICIENT MARKETS”?

Masten, Marshall Van Alstyne and seminar participants at the University of Michigan Busines

Complementarity Among Vertical Integration Decisions: Evidence from Automobile Product Development

This paper examines complementarity among vertical integration decisions in automobile product development. Though most research assumes that contracting choices are independent of each other, contracting complementarity arises when the returns to a single vertical integration decision are increasing in the level of vertical integration associated with other contracting choices. First, effective coordination may depend on the level of (non-contractible) effort on the part of each agent; contracting complementarity results if coordination efforts are interdependent and vertical integration facilitates a higher level of non-contractible effort. Second, effective coordination may require the disclosure of proprietary trade secrets, and the potential for expropriation by external suppliers may induce complementarity among vertical integration choices. We provide evidence for complementarity in product development contracting by taking advantage of a detailed dataset that includes the level of vertical integration and the contracting environment for individual automobile systems in the luxury automobile segment. Using an instrumental variables framework that distinguishes complementarity from unobserved firm-level factors, the evidence is consistent with the hypothesis that contracting complementarity is an important driver of vertical integration choices. The findings suggest that contracting complementarity may be particularly important when coordination is important to achieve but difficult to monitor.

Determinants of Contractual Completeness in Franchising

The aim of the study is to explain the determinants of contractual completeness in franchise relationships by formulating and testing various propositions derived from transaction cost theory, agency theory, property rights theory, organizational capability theory and relational view of governance. The degree of contractual completeness depends on behavioural uncertainty (negatively), trust (positively), franchisees’ specific investments (negatively), environmental uncer-tainty (negatively), intangibility of system specific know-how (negatively) and contract design capabilities (positively). The hypotheses are tested with a data base consisting of 52 franchise systems in Austria. The empirical results support the hypotheses regarding behavioural uncertainty, trust and intangible system-specific know-how.franchising;contractual completeness

MAKE-OR-BUY THEORIES: WHERE DO WE STAND?

The aim of this paper is to discuss the state-of-the art and the directions for research on the make-orbuy problem. After thirty years of research efforts, we now have numerous contributions explaining different aspects of the nature and existence of the firm. The search for a unified theory, however, still remains, at a theoretical level, a challenge. The task is not easy, perhaps because the theory of the firm develops along two different strands, one analyzing the factors influencing the boundaries, and the other one relating to the internal structure; or because, even inside the same research strand, it is not really easy to grasp the similarities and differences between contributions that have followed one another in rapid succession over the last few years. This paper examines the theories concerning the make-or-buy problem, focusing on recent contributions that have tried to develop a unified framework and emphasizes the role of incomplete contracts as a common and significant trait of the theories discussed

Hybrid Modes of Organization. Alliances, Joint Ventures, Networks, and Other 'Strange' Animals

The central message conveyed in this chapter is that there is a whole class of economic organizations that contribute substantially to what Coase (1992) called "the institutional structure of production". These arrangements fall neither under pure market relationships nor within 'firm boundaries'. They have multiplied because they are viewed as efficient in dealing with knowledge-based activities, solving hold-up problems, and reducing contractual hazards. They have properties of their own that deserve theoretical attention and empirical investigation.Hybrids, Alliances, Joint Ventures, organization theory, transaction costs, incomplete contracts

Bidding for Complex Projects: Evidence From the Acquisitions of IT Services

Competitive bidding (as auctions) is commonly used to procure goods and services. Public buyers are often mandated by law to adopt competitive procedures to ensure transparency and promote full competition. Recent theoretical literature, however, suggests that open competition can perform poorly in allocating complex projects. In exploring the determinants of suppliers’ bidding behavior in procurement auctions for complex IT services, we find results that are consistent with theory. We find that price and quality do not exhibit the classical tradeoff one would expect: quite surprisingly, high quality is associated to low prices. Furthermore, while quality is mainly driven by suppliers’ experience, price is affected more by the scoring rule and by the level of expected competition. These results might suggest that (scoring) auctions fail to appropriately incorporate buyers’ complex price/quality preferences in the tender design.Procurement Auctions, Scoring Rules, IT Contracts, Price/Quality Ratio

Trade, FDI, and the Organization of Firms

New developments in the world economy have triggered research designed to better understand the changes in trade and investment patterns, and the reorganization of production across national borders. Although traditional trade theory has much to offer in explaining parts of this puzzle, other parts required new approaches. Particularly acute has been the need to model alternative forms of involvement of business firms in foreign activities, because organizational change has been central in the transformation of the world economy. This paper reviews the literature that has emerged from these efforts. The theoretical refinements have focused on the individual firm, studying its choices in response to its own characteristics, the nature of the industry in which it operates, and the opportunities afforded by foreign trade and investment. Important among these choices are organizational features, such as sourcing strategies. But the theory has gone beyond the individual firm, studying the implications of firm behavior for the structure of industries. It provides new explanations for trade structure and patterns of FDI, both within and across industries, and has identified new sources of comparative advantage.