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.Reverse Auctions;Online Markets;IT Outsourcing;Opportunism;Transaction Costs;

The role of customer retention in business outcomes of online service providers

Despite great business outcomes that some service providers achieve on crowdsourcing marketplaces, many are unable to find customers, transact on a regular basis and survive. Previous research on the customer–provider relationship development in these marketplaces has shown the impact of provider profiles on customers’ decision-making and highlighted the role of prior relationship between the two parties as a major determinant of provider selection decisions of customers. However, little is known about the role of prior relationship and customer retention on the business outcomes of providers. This study theorizes a mediating impact versus a moderating impact of customer retention on the association between profile information and business outcomes of providers, building on the integrated information response model (IIRM). This study investigates two competing theoretical models using archival data from a leading crowdsourcing marketplace. The results show that a provider’s profile information is significantly associated with the provider’s business outcomes, while customer retention partially mediates this relationship for the self-provided information on the profile. Moreover, customer retention negatively moderates the positive impact of the customer-provided information on the provider’s business outcomes, implying the important role of new customers in achieving better business outcomes on crowdsourcing marketplaces