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Paper info: Business Relationships in the 'Digital Economy'. A property rights based analysis of the impact of the digital economy on relational exchange

Title


Business Relationships in the 'Digital Economy'. A property rights based analysis of the impact of the digital economy on relational exchange

Authors


Frank Ullrich

Place of Publication


The paper was published at the 17th IMP-conference in Oslo, Norway in 2001.

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Abstract


Since the mid of the 70s the importance of business relationships in industrial markets hasbeen investigated by the research of the IMP Group. However, according to some authors, thedevelopment of new information and communication technology, especially the rise of newmedia and the internet put into question the necessity of relationships as a mode for economicexchange in industrial markets. Electronic commerce is assumed to favour increased pricecompetition and an overall shift towards more use of markets rather than hierarchies orrelationships. This tendency towards perfect markets as described in neoclassical textbookeconomics is caused by reduced switching costs due to technology induced decrease oftransaction costs of search and coordination. However, a deeper analysis provide at least asmuch arguments contrary to this view. By applying a property rights theoretical perspective itwill be suggested that ownership related characteristics of transactions will get moreimportance in the ?digital economy?. A framework for analysis will be presented, that isbased on the property rights dimensions of ownership transfer, excludability and rivalry inusing a resource. It identifies different cases of the impact of ownership related issues ontransaction cost and switching cost and therefore on the mode of doing exchange. From thispoint of view it will be argued that hybrid governance mechanisms like relationships are stillan appropriate institution for coordinating transactions with certain ownership characteristicswhile others may tend towards more transactional coordination. Moreover, a convergence offormerly hierarchical and market governance toward hybrid like relationships could behypothesized. Besides this, it can be concluded that economic characteristics of transactionsfavouring business relationships are not only agency theory related ?informationasymmetries? and 'specificity? as analysed in transaction cost theory. Rather, the implicationsof the 'specification of property rights? may provide additional insights for an economicfoundation of relationship marketing.