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Paper info: Relationships, Services and the Question of Ownership. A Neo-Institutional Economic Interpretation of Business Relationships in the Service Industry

Title


Relationships, Services and the Question of Ownership. A Neo-Institutional Economic Interpretation of Business Relationships in the Service Industry

Authors


Frank Ullrich

Place of Publication


The paper was published at the 16th IMP-conference in Bath, U.K in 2000.

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Abstract


The often mentioned but never deeply investigated service characteristic of "no transfer ofownership" is a starting point for a property-rights based foundation of business relationshipsin the service industry. Looking at the distribution of property-rights between customer andservice provider the service exchange could be regarded as an economic relationship in thesense of a limited in time transfer of certain kinds of property-rights: "Usus", "Fructus","Abusus". The ownership determining right of selling all these rights to third parties willremain unchanged. By including the ownership related aspect of externalities a classificationof transactions can be developed that integrates the whole service sector includinginformation related services and services provided by non-profit organisations and thegovernment, within one theoretical concept. Therefore relationships seem to be a necessaryby-product of the economic features of services in terms of a contractual relation. However,relationships in services still remain a design variable for the service provider. No transfer ofcomplete ownership creates serious incentive problems and the problem of being "locked in"due to dedicated investments and sunk costs. Both will cause serious behavioural uncertaintyand safeguarding against opportunistic behaviour induces transaction costs. In order topromote and facilitate service transactions a service provider have to choose appropriateinstitutional designs of governance mechanisms that mitigate these economic consequences.