ps26

Info Systems J

(2005)

15

, 321–341

© 2005 Blackwell Publishing Ltd

321

Blackwell Science, LtdOxford, UKISJInformation Systems Journal1350-1917Blackwell Publishing Ltd, 200515

321341

Original Article

Business relationships in electronic marketsR Bunduchi

Business relationships in internet-based electronic markets: the role of goodwill trust and transaction costs

Raluca Bunduchi

Research Centre for Social Sciences, University of Edinburgh, Edinburgh EH1 1LZ,

Scotland, email: [email protected]

Abstract.

Transaction costs and goodwill trust, which differentiate between trans-

actional and collaborative relationships, were found in existing research to play a

significant role in the way organizations use internet technologies to manage their

relationships with customers and suppliers within electronic markets (EM). How-

ever, a thorough investigation of role that the two dimensions play together in shap-

ing the use of EM is lacking from the mainstream literature. This research

addresses transaction costs and goodwill trust together to clarify the transforma-

tions that internet use has brought on the nature of interorganizational relation-

ships that develop between EM players. The research finds the use of EM in

collaborative relationships is governed by trade-offs between different outcomes

that different EM functionalities have on organizational objectives. Organizations

assess these trade-offs, and select those functionalities that best serve to achieve

their collaborative relational objectives. In contrast, no trade-offs are find in the

transactional model, as the use of EM here is driven principally by transaction cost

reductions.

Keywords:

electronic markets, inter-organizational relationships, transaction cost

economics, trust

1

.

INTRODUCTION

Some of the first researchers to study the consequences that the use of information technology

(IT) has on the nature of buyer–seller relationships are Malone, Yates and Benjamin in their

seminal article

Electronic markets and electronic hierarchies

(Malone

et al

., 1987). The authors

apply the transaction cost economics (TCE) framework and show that IT use lowers transaction

costs and favours arms-length relationships between economic actors. Following TCE-based

research led to contradictory results regarding the outcome of IT use: Clemons

et al

.’s (1993)

study finds that IT use favours collaborative relationships, whereas Hart and Estrin’s (1991)

study suggests that IT use creates incentives for organizations to internalize their activities.

R Bunduchi

© 2005 Blackwell Publishing Ltd,

Information Systems Journal

15

, 321–341

322

A reason for these divergent results is that different types of IT applications can be used

to support different types of relationships (Gallivan & Depledge, 2003; Garcia-Dastugue &

Lambert, 2003). Organizational research differentiates between two types of buyer–seller rela-

tionships: transactional or arms-length relationships, and collaborative or obligational relation-

ships. The former are characterized by low interdependence, short-term commitment,

prearranged terms and conditions in a written contract, narrow communication channels, low

trust and low asset specificity. In contrast, the latter are characterized by strong interde-

pendences, high levels of trust and commitment, long-term span, high transaction costs, terms

and conditions loosely specified and high asset specificity (Sako, 1992; Morgan & Hunt, 1994;

Dyer

et al

., 1998; Lambe

et al

., 2001). Transactional relationships can be seen as economic

exchanges, concerned with the economic exchange of goods and/or services between parties,

whereas collaborative relationships involve economic as well as social exchanges such as

interdependencies, friendships, closeness and trust (Smith Ring & Van de Ven, 1994; Back-

haus & Buschken, 1997; Easton, 1997). As an economic theory, TCE fails to account for social

exchanges such as trust and power, which are considered irrelevant to the study of economic

exchanges (Williamson, 1993). Therefore, while TCE studies can explain for the outcome of IT

use in transactional relationships, they are limited in their ability to account for collaborative

outcomes of IT.

This study addresses a particular type of internet-enabled application, internet-based elec-

tronic markets (EM). This article follows Christiaanse

et al

. (2004) in defining EM as

‘electronic

networks where buyers and sellers meet to engage in buying and selling as well as other activ-

ities, such as collaborative planning, logistics, transportation arrangements and fulfilment’

(p.

152). Such a definition acknowledges that EM are not limited to a matter of buying and selling

(Bakos, 1991), but may also support a range of other functionalities such as supply chain man-

agement solutions, fulfilment and trust mechanisms (Christiaanse

et al

., 2004).

Depending on their core functionality, Markus & Christiaanse (2003) differentiate between

transactional and collaborative EM. Transactional EM provide mainly commerce functional-

ities, such as auctions and electronic billing, which enable members to conduct transactions,

whereas collaborative EM focus on functionalities which facilitate collaboration, such as

shared databases and inventory management. Both types might also provide content func-

tionality that does not generate cash flow, but enhance the EM’s core functionality, such as

discussions forums and event calendar. The authors argue that transactional EM can be seen

as purchasing intermediaries between buyers and sellers and can be analysed within the TCE

framework. In contrast, the TCE approach fails to account for the impact of collaborative EM,

whose core functionality is processes facilitation, not necessarily the mediation of purchasing

transactions.

Consequently, the TCE framework alone is inadequate to fully explain for the outcome of EM

use on interorganizational relationships (Kumar & Dissel, 1996; Kraut

et al

., 1998; Kumar

et al

.,

1998; Christiaanse & Kumar, 2000; Markus & Christiaanse, 2003). Markus & Christiaanse

(2003) suggests that different analytical frameworks are required to address the integration

effect of collaborative EM, and the role of power and pre-existing relationships between actors.

Kraut

et al

. (1998) and Kumar

et al

. (1998) argue that collaboration relational characteristics

Business relationships in electronic markets



15

, 321–341

323

such as trust should be included in the TCE analysis to address EM use in collaborative

relationships.

This article follows the latter recommendations and analyses the collaborative and transac-

tional use of IT in relationships between buyers and sellers through addressing transaction cost

and goodwill trust. The article is structured as follows: section 2 discusses the theoretical foun-

dations of the study and clarifies the transaction costs and trust concepts. The research meth-

odology is presented in section 3. Section 4 describes the role that trust and transaction costs

play in explaining the nature of business relationships between EM players in two case studies.

The research conclusions, limitations and future research are discussed in section 5.

2

.

BACKGROUND

:

TRANSACTION

COSTS

,

TRUST

AND

EM

2.1. Transaction cost economics-based approaches

Research regarding the role of IT in shaping the nature of interorganizational relationships has

predominantly adopted a TCE stance. The reason is that TCE explains such relationships in

terms of transaction costs, where these transaction costs are directly related to IT use (Malone

et al

., 1987).

According to TCE, organizations choose between alternative types of business exchanges

based on the level of transaction costs (Williamson, 1986). Collaborative exchanges are pre-

ferred when transaction costs are high, whereas transactional exchanges are preferred when

transaction costs are low (Clemons

et al

., 1993). Transaction costs are seen as the crucial vari-

able influencing the nature of interorganizational relationships.

Transaction cost economics literature differentiates between two categories of transaction

costs aspects:

1

Transaction costs – defined as

‘the costs of exchanging information and incorporating that

information into decision processes, as well as the costs incurred by the firm due to delays in

the communication channel’

(Clemons

et al

., 1993, p. 15).

2

Transaction risks – defined as

‘the cost associated with the exposure to being exploited in

the relationships’

(Kumar & van Dissel, 1996, p. 292) include operation and opportunism risks.

a. Operation risks are

‘the risks that the other parties in the transaction wilfully misrepresent

or withhold information, or underperform – that is “skink” – their agreed-upon responsi-

bilities’

(Clemons

et al

., 1993, p. 15). The existence of high operation risks requires orga-

nizations to closely control and monitor the exchange.

b. Opportunism risks are

‘the risks associated with a lack of bargaining power or the loss of

bargaining power directly resulting from the execution of a relationship, that is, a differ-

ence between ex ante and ex post bargaining power’

(Clemons

et al

., 1993, p. 16). High

asset specificity, few potential partners and loss of resource control as a result of the

exchange generate opportunism risks.

It is generally assumed in the literature that IT use reduces transaction costs. Malone

et al

.

(1987) argue that IT use reduces the time and cost of communication, decreases the costs of

R Bunduchi



15

, 321–341

324

the product selection process, and allows for a tighter coupling of information processes that

increases the speed, reduces the errors, and allows for better linkages between the buyers and

suppliers’ information systems (IS) which lower transaction costs. This outcome is confirmed

in following studies. Bakos (1991; 1998) finds that searching costs are lower within EM, Hart

& Estrin (1991) note that IT use improves coordination, while Clemons

et al

. (1993) argue that

IT use reduces the costs of explicit coordination.

As according to the TCE framework, lower transaction costs lead to higher reliance on trans-

actional exchanges, some researchers argued that EM use facilitates the development of

transactional relationships between EM players (Malone

et al

., 1987). However, following stud-

ies find that IT use enables more efficient control through better information flow, whereas

higher reliance on open standards reduces the idiosyncrasy of IT investments which translate

in lower operation and opportunism risks (Clemons

et al

., 1993). As these risks are higher in

collaborative relationships, it means that as EM use reduces transaction risks, organizations

have more incentives for collaboration. Following studies confirmed that EM relationships tend

to be collaborative in nature (Steinfield

et al

., 1995; Bakos & Brynjolfsson, 1997; Christiaanse

& Kumar, 2000).

Not all empirical research confirms this collaborative effect of IT use. Hart & Estrin (1991)

find that EM development is associated with high vulnerability costs such as

‘the costs of

adopting specialized procedures, erosion of control over internally generated information’

(p.

376). These vulnerability costs are manifestations of what Clemons

et al

. (1993) call oppor-

tunism risks, i.e. loss of control resulting from specialized investments. Geun Lee & Clark

(1996/97) find that EM lead to higher uncertainties as buyers face the risks of incomplete and

distorted information, and sellers face the possibility that their offers will not be appropriately

valued in an unproved market system. These uncertainties translate in higher opportunism

risks, that obstructs EM adoption (Geun Lee & Clark, 1996/97) and encourages internalization

of activities (Hart & Estrin, 1991).

Figure 1 summarizes these different findings.

Different explanations are advanced in the literature to justify for the different outcomes of

EM use. They include organizational objectives (Garcia-Dastugue & Lambert, 2003), supply

chain characteristics (Christiaanse & Kumar, 2000), and the inability of the TCE framework to

account for the integration effects, the history of pre-existing relationships (Markus & Chris-

tiaanse, 2003), and the trust and interpersonal relationships between EM players (Steinfield

et al

., 1995; Kraut

et al

., 1998; Kumar

et al

., 1998; Christiaanse & Kumar, 2000). This article

focuses on the latter explanation and addresses the role of trust in shaping the use of EM in

buyer–seller relationships.

2.2. Beyond economic exchanges: trust and EM

Existing research defines trust as a critical characteristic of collaborative interorganizational

relationship (Morgan & Hunt, 1994; Zaheer

et al

., 1998; Lambe

et al

., 2001). However, TCE

conceptualizes business relationships in terms of transactions between economic actors, char-

acterized by opportunistic behaviour, that is calculative self-interest. In this context, trust is




15

, 321–341

325

‘warranted when the expected gain from placing oneself at risk is positive, but not otherwise’

(Williamson, 1993, p. 463) and is described as a subclass of risk. Trust based on faith in the

other actors is considered irrelevant to the study of economic exchanges. However, trust was

found as a critical concept to influence the development of interorganizational relationships in

a number of organizational studies (Sako, 1992; Smith Ring & Van de Ven, 1992; 1994; Morgan

& Hunt, 1994; Zaheer

et al

., 1998)

The literature provides two general conceptualizations of trust: risk-based trust, defined as

confidence in one’s expectations about another’s behaviour; and goodwill trust, understood as

confidence in another’s goodwill (Smith Ring & Van de Ven, 1994; Nooteboom, 1996; Pavlou,

2002). The risk-based perspective on trust acknowledges that parties will employ formal con-

tracts to hedge against the uncertainty in the relationship, whereas the goodwill perspective

emphasizes the role that interpersonal interactions between organizations play in dealing with

this uncertainty. Such interpersonal relationships create faith in the moral integrity of the other

party that she will not take advantage of the relationship (Smith Ring & Van de Ven, 1994).

This research follows Nooteboom (1996) and Smith Ring & Van de Ven (1992) in addressing

the role that goodwill trust has in understanding the nature interorganizational relationships.

Goodwill trust can be defined at two levels (Zaheer

et al

., 1998):

1

personal level – trust between individuals.

2

organizational level – trust between organizations.

Figure 1.

Transaction costs and risks, and electronic markets (EM).

Informationtechnologies

Transactionrisks

Transactioncosts

Transactionrisks

Collaborativerelationships

(Bakos & Brynjolfsson, 1997;

Christiaanse & Kumar, 2000;

Competitiverelationships

(Malone et al., 1987)

Barriers for EMadoption

& internalisation(Hart & Estrin, 1991;

Geun Lee & Clark, 1996/97)

Efficient control,Better information flow,Open standards

Increase communication speed,Reduce communication costs

Reduce the costs of searchingfor and selection of products

Increase speed, reduce errors,Improve the linkages betweenpartners informational systems

Adoption of specialised procedures,Erosion of control over internallygenerated information(Hart & Estrin, 1991)

Incomplete and distorted informationand unproven market systems whichincrease uncertainties(Geun Lee & Clark, 1996/97)

–

–

+

(Clemons et al., 1993)

(Clemons et al., 1993; Malone et al., 1987)

(Clemons et al., 1993; Malone et al., 1987)

(Malone et al., 1987)

Clemons et al., 1993)

Steinfield et al., 1995)

R Bunduchi



15

, 321–341

326

By its nature, trust is defined at the personal level, however, individuals in an organization may

‘share an orientation toward another organisation’

(Zaheer

et al

., 1998, p. 143). The two levels

are closely interrelated:

•

As individuals enact the relationship between organizations, their personal relations become

part of the interorganizational relationship (Gulati

et al

., 2000), and;

•

Interpersonal relations are conditioned by the legal systems and organizational role respon-

sibilities that characterize relationships between organizations (Smith Ring & Van de Ven,

1994).

Triggered by the limitations identified in the TCE framework to deal with the social aspects

of IT use (Kumar

et al

., 1998), as well as by the increasing focus in organizational research in

the role that trust plays in shaping interorganizational relationships (Pavlou, 2002; Gallivan &

Depledge, 2003), a number of studies have begun to address the role that trust, and in par-

ticular goodwill trust, plays in the context of EM relationships.

In general, existing research converges on the belief that EM affects significantly the level of

trust between the actors involved (Luo, 2002; Gallivan & Depledge, 2003), although only few

such studies differentiate between goodwill and risk-based trust (Pavlou, 2002; Ratmasingam,

2005). Specific institutional mechanisms such as cooperation norms and accreditation were

found to support goodwill organizational trust in internet-based EM (Luo, 2002; Pavlou, 2002).

Luo (2002) argues that EM also sustains personal trust through online communities and other

linkages between strategically allied companies. Security services such as confidentiality and

authentication mechanisms embedded in EM are also shown to support goodwill (Ratmasin-

gam, 2005) interorganizational trust development (Srinivasan, 2004). Based on an extensive

analysis of existing studies regarding the relation between IT use and trust in interorganiza-

tional relationships, Gallivan & Depledge (2003) conclude that the use of such technologies

can enhance trust between EM players, but such outcome depends on the type of IT func-

tionalities used. The study suggests that whereas open sharing of confidential information sus-

tains trust development, one-sided information flow, e.g. (i.e. monitoring the other party), leads

to low levels of trust.

Trust was also shown to influence IT use (Meier, 1995; Hart & Saunders, 1998). Hart and

Saunders’ study (1998) finds that trust alleviates the risks that the other party will take advan-

tage of the information exchanged in the relationships. Soliman & Janz (2004) find that with the

advent of internet, trust remains a significant variable influencing the adoption and use of inter-

organizational systems. Such a finding is confirmed in other studies that find that organizations

are more likely to engage in internet-based exchanges with trusted parties (Vlosky

et al

.,

2000). However, none of these studies differentiate between the various types of trust.

In conclusion, trust literature argues that there is a two-way relation between trust and

EM use, although it is not always clear which type of trust do the findings refer to (Gallivan

& Depledge, 2003). As trust supports collaborative relationship (Lambe

et al

., 2001), it

appears that collaboration is a prerequisite for EM use, and can be reinforced through the

use of such technologies. Based on existing literature, this argument is summarized in

Figure 2.




15

, 321–341

327

Existing research suggests that both transaction costs and trust play a significant role for the

way EM are used between buyers and sellers. However, whereas some TCE-based studies

suggest that goodwill trust has to be included into the analysis to clarify the outcomes of EM

on the nature of interorganizational relationships (Kumar

et al

., 1998; Christiaanse & Kumar,

2000), there are no empirical studies in the mainstream literature that address these dimen-

sions together. Moreover, research on trust in EM, with a few exceptions (Pavlou, 2002), does

not differentiate explicitly between goodwill and risk-based trust, and even then, it does not

address the personal and organizational dimensions together.

This research addresses the role that transaction costs and goodwill trust have in explaining

the outcomes of IT use on the nature of relationships developed among EM players. The

research methodology that guided the empirical research is discussed in the next section.

3

.

RESEARCH

METHOD

The empirical research follows a qualitative multi-case study research design. The choice was

based on the following rationales.

Figure 2.

Trust and the use of electronic markets.

TR US T

In fo rmatio n te c hno lo gi es

In st itutio na l me chanis ms

Se cu ri ty se rv ic es ( Ra tn as i nga m , 20 05 ;

Sr in iv as an , 20 04 )

Open info rmation sharin g ( Ga lliv an & D epl ed ge , 20 03 )

One si de d inform at io n flow ( Ga lliv an & D epl ed ge , 20 03 ) TR US T

TR US T Co lla borativ e re la tions hi ps

( Ga lliv an & , 2003 )

Co mp et it iv e re la tions hi ps

( Ga lliv an & Depledge , 2003 )

+

–

Depledge (reducesvulnerability)(Hart & Saunders,1998; Meier, 1995;

Soliman & Janz, 2004;Vlosky et al., 2000)

Online communities; linkages between

allied organisations (Luo, 2002)

(Cooperative norms, accreditation, feedback)

(Luo, 2002; Pavlou, 2002)

R Bunduchi



15

, 321–341

328

First, the notion of ‘trust’ is multi-dimensional and difficult to measure, leading to its different

conceptualizations in IS empirical studies (Gallivan & Depledge, 2002). As case studies focus

on in-depth analysis (Stake, 1995), they enable the researcher to explore the complexity of the

‘trust’ concept. Second, this research understands technology as a social construct (Russell &

Williams, 2002) shaped by the organizational context in which it is used (Ngwenyama & Lee,

1997). Case study design approaches enable the researcher to capture and understand the

social and organizational context in which the phenomenon – the use of EM – occurs (Hussey

& Hussey, 1997). Finally, following Stake (1995), the focus of this research is to search for hap-

penings and not occurrences. The thrust of the study is to understand the phenomenon – the

use of EM in relation to transaction costs and trust – without necessarily looking for the sta-

tistical representation of the findings. This focus influences both the ontology of the research

as the phenomenon cannot be abstracted from the subjective interpretations of the people who

experienced them, and the research epistemology as the researcher sees herself as part of the

social constructed reality, and believes that understanding the meanings that participants place

on their experiences requires interactive discussions between herself and the participants.

Qualitative case studies fulfil both requirements, as approach reality as socially constructed by

the people involved (Creswell, 1994), and enables the researcher to interact with the respon-

dents to capture their meanings and experiences (Stake, 1995).

One of the common critiques of the qualitative case study design is the extent to which the

findings are generalizable to populations or universes (Yin, 1994). Two arguments against this

critique are explored here. First, case studies are generalizable to theoretical propositions and

not to populations in the sense that case studies do not (aim to) represent a ‘sample’ of the total

population. The aim of the investigator is to understand a particular issue (Stake, 1995), and

not to enumerate instances in which a particular theory holds true (Yin, 1994). Second, often

quantitative approaches are themselves unable to explain the limits to the domain of gener-

alizability from their empirical findings. Russell & Williams (2002), e.g. argue that large-scale

surveys can run to risk to inappropriately group different phenomena on the basis of features

that are not necessarily the most significant.

Two unrelated organizations are included into the study, as shown in Table 1:

The selection of the cases follows the intensity criteria (Miles & Huberman, 1994). At the time

of the study, internet-based EM were relatively a recent phenomenon and their use is not wide-

Table 1.

Overview of cases

Characteristics OrgA OrgB

Industry Petroleum Energy

Role Consultancy Multi-utility

Size Large Large

Respondents Strategic Architect (SA); Customer

Web team member (CW); Manager

in Organizational Development (MOO)

Supply Chain Manager (SCM),

General Manager (GM), Product Manager

(PrdM), IT consultant (ITC),

Director of System Integration (DSI)




15

, 321–341

329

spread (Leek

et al

., 2003). It was assumed that leading companies would have not only the

financial resources to acquire such technologies, but also that the expectations of their part-

ners regarding EM adoption will be higher for them. Therefore, the cases were selected among

the leading organizations in their industries assuming that in such cases EM usage would be

most intensive, thereby providing rich information.

Data collection was based on semi-structured interviews complemented with documenta-

tion, which, following Remenyi

et al

. (2000), was primarily used to set the context for the inter-

views. The interview guide followed a loose structured format, with open-ended questions that

were intended to stimulate the respondents to reflect on their experiences in using the EM

across different partners. The questions were mapped onto the research objectives, as shown

in Table 2.

Data validation was ensured through next day respondent validation, and through data tri-

angulation. The information obtained during the interviews was checked, where possible, with

the data gathered through documentation, and with the data provided by other interviewees.

As this study seeks to combine two theoretical insights (TCE and trust) rather than to focus

on the description of a case, ‘relying on a theoretical proposition’ was chosen as the strategy

for data analysis. Data analysis begun gradually as the interviews proceeded. The approach

allowed for a gradual refinement of the interview guide as new relevant topics appeared during

the analysis and of the list of codes as the tentative conclusions were tested against new evi-

dence (Miles & Huberman, 1994; Stake, 1995).

Categorical aggregation (Stake, 1995), or what is called ‘open coding’ in grounded theory

(Strauss & Corbin, 1990), was used to reduce the data. Coding started with a provisional list

of codes created prior to the fieldwork based on the literature review. These codes are labels

attached to chunks of data from the interviews, which serve to assign units of meaning to the

information compiled during the study (Miles & Huberman, 1994). The initial list included two

Table 2.

Interview guide and research objectives

Interview guide Research objective

What are the key internet applications used to support customers

and/or suppliers relationships?

Identify the use and key functionalities of the

EM.

Are they used to the same extent with all types of partners? Explain

the differences. Are there different levels of using these

technologies in terms of access, amount of information,

customization?

Identify the characteristics of EM applications.

Explain how/if their use varies depending on

the characteristics of business relationships.

What are the reasons for the existence of these differences?

Are such differences related to interpersonal relationships,

confidence in the other party, communication costs, or the risks

involved in the transaction?

Which are the main advantages/disadvantages in using the EM

applications? Are these related to trust, cost reductions or

transaction risks?

Identify the outcomes of the use of EM

applications on the level of trust, transaction

costs and risks.

EM, electronic market.

R Bunduchi

© 2005 Blackwell Publishing Ltd, Information Systems Journal 15, 321–341

330

broad categories: (1) concepts regarding EM applications such as extent of use and type of

exchange, and (2) concepts concerning the nature of relationships such as personal and orga-

nizational trust, communication and coordination costs, operation risks and opportunism risks.

Based on these codes, descriptive data displays were generated to explore the relation

between EM use and the nature of interorganizational relationships. For example, conceptual

clustered matrix were developed to explore the linkages between EM use and the nature of

interorganizational relationships. Table 3 described one such matrix developed to map the out-

comes of EM use on transaction costs and trust for OrgA.

Such descriptive matrix displays served two purposes. First, they allowed an in-depth explo-

ration of the phenomenon (the relation between EM usage and the level of trust and transaction

costs). Second, displaying the data in a structured and organized fashion helped the

researcher to better comprehend the phenomenon. Based on this improved understanding, the

researcher was able to gradually refine the list of codes. For example, the level of customiza-

tion of the EM applications was added to the EM concepts category as it recurrently appeared

to reflect different usages of EM in different types of relationships.

Table 3. Conceptual clustered matrix illustration

EM

outcomes/type of

relationship

Bronze (low

transaction costs,

organization trust

present)

Silver (medium transaction costs

and organizational trust)

Gold (high transaction costs and

organizational trust)

Transaction costs Replace offline with

online interaction (–)

Replace offline with online

interaction (–)

Replace offline with online interaction

(–)

The registration and

administration of EM

applications is done by the

client, not by OrgB (–)

The registration and administration of

EM applications is done by the client,

not by OrgB (–)

EM applications are highly customized

to the gold customers’ requirements

(+)

Transaction risks None None High customization of EM applications

increases customers’ switching costs,

and improves OrgB’s bargaining

position (–)

Organizational

trust

None EM applications support

confidential information

exchange with the customer (+)

EM applications support

confidential information exchange with

the customer (+)

The use of EM supports transparent

service delivery to customers (+)

Personal trust Replace offline with

online interaction (–)

Replace offline with online

interaction (–)

Replace offline with online interaction

(–)




331

The descriptive data displays were followed by explanatory data displays, which served

to identify relationships among the different variables, and eventually led to conclusion

drawing and verification. The explanatory data display used was causal networks. Causal

network are techniques that map the relationships (arrows) between variables (nodes) in

the study, where such relationships imply causality rather than just correlation (Miles &

Huberman, 1994). Casual networks served to explain the relations between the emerging

codes.

Following Miles and Huberman’s recommendations (1994), ‘noting patterns’, and

based on these patterns, ‘identifying relations between variables’ were the first steps

in building causal networks. For example, during the first case, the use of EM was

frequently associated with relationships involving high transaction costs. According to

the interviewees, the same pattern appeared: to develop and then use EM to medi-

ate the transactions with other parties required high set up costs. In order for the

organization to accept such costs, high costs savings had to be achieved through the

use of EM in those transactions. Because the use of EM was seen as reducing

the costs of information sharing between organization, such costs saving would be

higher where there is a high level of interaction going on between the organization,

i.e. high transaction costs. Such pattern emerging through the data supported the

drawing of the first tentative links in the causal networks. In situations in which the

relations between two variables could not be precisely explained, for example between

the use of EM and the duration of business relationships, ‘finding the intervening vari-

ables’, that is the switching costs associated with EM use which explain why the par-

ties prolong the relationship, was a useful tactic to develop the links in the network.

As causal networks were constantly refined, tentative conclusions could be developed

for each case.

The tactic used to bring together all the patterns and relations identified across the three

cases, and to develop the conclusions was ‘building a chain of evidence’, as suggested by

Miles & Huberman (1994). For example, the choice to use EM and the level of trust between

the parties appeared to be related in both cases. Figure 3 describes the causal network built

to explain this relation.

The logical chain was constructed gradually as the analysis progressed and the causal net-

works were successively compared against the new evidence and refined as a result. At each

step in the cases’ analysis, the links were verified as following interviewees were asked to

check them. Such constant verification and refining were facilitated by the flexible approach to

data collection which allowed new questions to be added and new topics to be explored during

the interviews.

Following Miles & Huberman (1994), casual networks narratives were developed to

verify that the interpretation obtained from the casual network is plausible. The narra-

tives helped to identify and explain the context, to describe the casual relationships

mapped onto the network, and to explain why the variables are chained as they are.

These narratives led to the development of the case outputs that are described in the

next section.

R Bunduchi


332

4. CASE STUDIES

The characteristics of EM applications and the type of relationships included in the study are

described in Table 4.

The use of EM and their outcomes on the nature of customer relationships is explained in the

following sections.

4.1. OrgA

OrgA is a service company part of one of the leading groups in the petroleum industry. OrgA

offers technical consultancy services ranging from providing the technology for extraction and

exploration to developing the software for oil trading operations. Although the company was

Figure 3. Electronic markets

(EM) use and trust.

EM use

EMUSAGE

TRUSTBUILDING

Fear that the otherparty will take

advantage of theinformation exchanged

through the EM

Sharing confidentialinformation (such

as advance product information)

Open communicationbetween the parties

(such as throughdiscussion forums)

-

Explanation

• The existence of trust positively influences the use of EMbetween organisations as itreduces the risks that the otherparty will behave opportunistically and takeadvantage of the information exchanged. At the same time, ifEM is used to share confidential information, and to support open communication, then it createsconfidence in the other partythus facilitating trust building. Inthis way, the directions ofinfluence among variables, i.e.trust and EM use, were identified and explained.

Table 4. Electronic market’s characteristics

Characteristics OrgA OrgB

Role Supplier of consultancy services for the

petroleum industry

Supplier of energy services for business

and home customers

Ownership OrgA OrgB

Functionalities Information services such as industry news and white

papers, event calendar, generic discussion forums,

newsletters

Information services such as industry news

and white papers

Catalogue and consulting services and dedicated

message services, shared databases

Electronic billing, internet invoicing,

data visualization and analysis tools,

data forecasting

Time in use 5 years 2 years



333

created in order to expand the parent company’s research and technical consultancy market,

the majority of OrgA’s customers are the parent group’s operating companies.

OrgA differentiates between their customers based on their belonging to the parent group

(internal vs. external customers), and the duration and financial value of their contract. In gen-

eral, internal customers are ‘high value companies’ with whom OrgA ‘has the biggest con-

tracts’, and who are ‘highly profitable’. Such customers are labelled as ‘large customers’ with

contract running a number of years, in contrast with the ‘small customers’ which are in general

external customers, with a smaller financial contract, generally running out within one year.

Although smaller in the financial value of their contract, external customers play a central role

for OrgA because they allow the company to leverage the various products of parent group’s

operating companies across a larger market, and thus reduce the costs and increase the effi-

ciencies in their operations. According to the interviewees, to attract smaller customers was

one of the strategic drivers that led to the creation of OrgA:

[OrgA] was created in order to reduce the cost overheads by offering the opportunity to sell

the technical skills provided by the company’s different business groups to a larger market.

. . . from the products that the business groups have developed for large customers, we can

take individual components that can be sold to smaller customers. In this way we can

increase the market without increasing the costs. (SA)

Part of the initiative to increase efficiencies while improving customer relationships was the

development of an EM to support the delivery of consultancy services to internal and external

customers alike. The services are delivered by selling to the customers a number of licences

that are rights to access a particular service over the EM. There are three types of licences

depending on the type of EM functionality provided to customers, as illustrated Table 5.

Table 5. Services delivered over EM

Type of licence Target customer Services offered

Bronze licences Small customers Generic content functionality tailored to the generic requirements of a particular

market sector. Services include: access to a generic library, newsletters, open and

generic discussion forums, OrgA promotional information and a generic list of

contacts within OrgA.

Silver licences Small customers Similar content functionality as for the bronze licence, but which is customized to

the requirements of individual customers. Such customized services include

access to the customers’ own customized libraries, to their own list of OrgA

contacts; and access to and OrgA expert which can provide confidential advice

through messaging services.

Gold licences Large customers In addition of the customized information services, at this level the EM provides

collaborative functionality tailored to the specific needs of individual customers.

The information from the customers’ databases is stored within online

applications, which means that OrgA is able to review most of the data remotely,

and deliver the service to such customers online through the EM


R Bunduchi


334

Bronze licences are usually acquired by small customers whose contract with OrgA has

ended, but who are still interested in the information services provided by OrgA.

According to the interviewees, the major benefit of using the EM application is that it

improves the coordination of customer relationships. Through providing online functionalities

such as remote consultancy services, message services and shared databases, the EM

speeds up the exchange process and decreases communication costs. Faster and cheaper

communication and coordination leads to lower transaction costs. For example, the use of

shared databases means that most of the consultancy work is conducted remotely. Remote

work speeds up the delivery of customer services, and reduces communication and coordi-

nation costs, as described in the following example:

for a consultant to review all the data from a plant it took 5 days. Besides, the need to

have the consultant on the site represents a big overhead for us, and being able to do

this process remotely means reducing this costs overhead not only in terms of reducing

the travel costs, but also in terms of a more efficient use of time for the consultant. Dur-

ing this time, the consultant can also work simultaneously for somebody else, while being

at the customer’s site means that during that 5 days he can work only for that customer.

(SA)

Whereas online interaction generally improves coordination, the delivery of functionalities

such as shared databases and customized discussion forums increases maintenance costs,

adding to the overall information processing costs. Nevertheless, customization is required in

order to increase large customers’ switching costs and thus to restrict their choice of potential

suppliers. According to one interviewee:

the use of the applications will be embedded in the customer’s process: so even if the com-

petitors will have the same applications, will be difficult for the clients to switch the applica-

tion. The gold licences will allows us to own representation of the customer data [so it] will be

difficult for the client to switch to another competitor. (SA)

Higher switching costs restrict the large customers’ choice of potential suppliers. As OrgA

‘own representation of the customer data’, it finds itself in a better bargaining position in fol-

lowing negotiations, which translates in lower opportunistic risk for OrgA. However, whereas

opportunistic risks are lower for OrgB, they become higher for customers because of the

restrictions in the number of potential suppliers. Additionally, collaborative functionalities such

as shared databases enable OrgA to gain tight control over the information flows with the cus-

tomer, hence reducing the operation risks associated with a misrepresentation or withholding

of information.

The reduction of communication and coordination costs is done at the expense of personal

trust. Remote work through online consulting services, e.g. reduces the amount of face-to-face

communication, hence social exchanges between OrgA and its customers. The interviewees

emphasized this outcomes as a significant concern for OrgA, because the lack of personal

contact with customers hinders the development of personal trust that has negative outcomes

for quality of the overall customer relationship. Nevertheless, the interviewees stated that the



335

customers accept the reduction in personal contact because the EM use increases their oper-

ation efficiency as well. As described by one of the interviewees:

The disadvantage of the [EM] is that the customers perceive that there will be less face-to-

face contact [and] the customers will get less personal contact […] but in any case they usu-

ally phoned the operating companies representatives, which routed them to the expert who

usually answered the customers’ inquiries later in the week when he had time. On the Cus-

tomer Web, the access is 24 h per day, so it is a much more efficient tool at directing ques-

tions. (CW)

Although reducing personal trust, the use of EM enables OrgA to support organizational

trust development. First, by using customized content functionalties, OrgA uses EM to

exchange confidential information with the customers, hence building customers’ confidence in

the organization. Second, organizational trust development is facilitated by using the content

functionalities of EM such as discussion forum which enable transparent service delivery.

According to the interviewees:

each service failure will contribute to decrease the customers’ trust in the channel, so in

order to increase [customers] trust we need to make sure that the channel is a transparent

as possible. The transparency is sustained by the existence of discussion forums. (CW)

Discussion forums enable customers to communicate between themselves and with OrgA

thus increasing the transparency in the relationship and building customers’ confidence in

OrgA’s good faith, which can compensate for the negative outcome of a service failure. This is

an illustration of risk-based trust: any service failure undermines the risk-based trust, i.e. the

confidence in the ability of the partner to comply with its promises. However, goodwill trust

based on confidence that the partner acts in good faith, even if he errs, can compensate for a

decrease in the risk-based trust. In conclusion, EM has a range of outcomes on transaction

costs and goodwill trust: in reduces personal trust but it increases organizational trust, reduces

transaction cost while at the same time increasing them to enable opportunism risks reduc-

tions, and finally reduces operation risks.

4.2. OrgB

OrgB is a integrated multi-utility company, including gas as well as electricity businesses

(although the former is significantly lower in terms of revenue than the latter), and participating

in all four activities in the energy supply chain: generation, transmission, distribution and sup-

ply. This study focuses on the electricity group, and the use of EM in their customers relation-

ships. For the purpose of this study, customers are defined here as the end customers, i.e. the

consumers of electricity such as plants, hotels and households.

OrgB classifies its customers based on the financial value of their contract, i.e. their energy

consumption. Residential customers include home and small businesses customers with an

energy consumption less then 1 MW per year. Large business includes customers with an

energy consumption higher than 1 MW per year.

R Bunduchi


336

In an effort to achieve cost savings, OrgB set up the EM to support payment and deliver elec-

tricity services with both residential and large business customers. The services delivered over

EM depend on the type of customer, as illustrated in Table 6.

OrgB emphasizes cost savings as the principal outcome of using the EM with both residen-

tial and large business customers. As one respondent mentioned:

At the end of the day, the whole scope of the technology is to reduce costs, either by reduc-

ing personal contact, which unfortunately means less people, or by allowing the company to

move quickly, and achieve more flexibility. (GM)

Cost reductions are achieve through functionalities such as electronic billing and internet

invoicing services which significantly reduce paper- and phone-based communication costs,

while at the same time reducing the number of personnel dealing with customers. These reduc-

tions are illustrated by the following response:

the [EM] produces cost savings: it reduces the cost to serve the customer. For the online cus-

tomers, we don’t send any paper bill anymore, all the correspondence is done online. So

there are the cost savings for the paper billing. . . . All the benefits come from the cost sav-

ings, not only paper, but also the reduction in the personnel that deals with the customers.

There is no need for so many people anymore to answer the phone, or look for information,

as everything is handled online. (PM)

Electronic market commercial functionalities such as electronic billing and internet invoicing

enhance the transparency of service delivery enabling online customers to check the level of

their energy consumption whenever they want. They can also pay the bill online whenever they

choose during a quarter, rather than having to wait for OrgB to issue the bill at the end of the

quarter. This reduces customers’ misunderstandings regarding the amount of energy con-

sumption, which according to the interviewees is commonplace when the customer receives a

paper-based bill. As these misunderstandings represent that largest part of all communication

Table 6. Electronic market functionalities in OrgB

Type of customer Services offered

Residential customer Offers primarily commerce functionality in the form of online billing which allows the customer to

create and pay the bill online.

It provides limited information services such as contact information.

Large business Internet invoicing which enables customers to analyse the invoices online or download the

information directly into internal systems.

Peak demand forecast which provides customers with predicted demand forecasts during the

winter months (November – February). This enables the customers to identify periods of

expected high demand and potentially high charges.

Data services which provides information visualization, analysis and standardized report tools

to the customers.

Content functionalities such as demos, contact information, industry news and papers.



337

between customers and OrgB, the use of EM means not only cheaper communication

(because online communication is cheaper than paper- and phone-based communication), but

also less communication between OrgB and its customers that further reduces the communi-

cation, and improves coordination. As described by one respondent:

[online customers] can create the bill whenever they want. They don’t have to wait 90 days,

which is the time it takes us to send out the bill to paper-based customers. The [energy] con-

sumption is much more visible for them online. Online customers can also phone or send us

an e-mail if they have any questions . . . [there is] less communication than with offline cus-

tomers. The type of messages that we have with online customers is if something is not

working, or if they want to change something, but the rest of the problems are avoided with

online customers. (PM)

In contrast with OrgA, no evidence was found in this case of an increase in the level of trans-

action costs as a result of EM use. One explanation may be the limited experience with the

deployment of EM, as EM was launched by OrgB only 2 years ago.

As mentioned by one respondent, whereas commerce functionalities such as electronic bill-

ing enable less and cheaper communication with the customer, and ease the coordination of

the overall relationship, it also reduces personal contact that inhibits personal trust develop-

ment. Personal trust requires social exchanges between the parties involved in a relationship,

and such exchanges are more likely to happen over the phone and face-to-face than through

online communication (email). As the respondents argued:

E-mail doesn’t let you build a personal relationship, or develop trust in the person you com-

municate with. (RMTM)

Whereas in the case of residential customers such social exchanges were already limited

(because only phone- and paper-based channels were open to them), the decline in social

exchanges is higher for large businesses customers who were dealt directly and personally by

an OrgB representative.

None of the functionalities provided through the EM support (or inhibit) organizational trust

building. No evidence was found to suggest that OrgB is concerned with or attempts to support

goodwill trust through the use of EM. At the same time, the respondents did not perceived any

changes in the level of transaction risks as a result of EM use with the customers.

4.3. Discussion

The two case studies analyse two different models of EM use in interorganizational relation-

ships, a collaborative model in the first case, and a transactional model in the second case.

In both models, a major outcome of EM use is transaction costs reductions, sustained

through commerce functionalities such as remote consultancy services, electronic billing as

well as collaborative functionalities such as dedicated messaging service. Such an outcome

supports the large body of TCE-based studies which argue that IT in general, EM in particular

lowers transaction costs (Malone et al., 1987; Bakos, 1991; Hart & Estrin, 1991).

R Bunduchi


338

In the collaborative model, we found that EM use can increase communication and

information processing costs. The explanation relates to the trade-offs involved in collabo-

rative EM use. These trade-offs refer to the choices that the organization makes between

the different outcomes of EM functionalities on its objectives. Whilst the use of content

and collaborative functionalities such as customized discussion forums and shared data

bases adds to the level of transaction costs, they also increase customers’ switching costs

leading to lower opportunism risks. As such transaction risks are higher in collaborative

relationships (Clemons et al., 1993), the organization places more emphasis on the ability

of EM to reduce transaction risks, than the ability of EM to reduce transaction costs. Con-

sequently, the owner of the EM (in our case the supplier) assesses the different out-

comes that EM functionalities have on its objectives, and selects to use those that best

achieve its objectives.

A similar trade-off in the collaborative model relates to transaction costs and personal trust.

Commerce functionalities such as electronic billing and remote consultancy services are used

to reduce transaction costs, although they hinder personal trust. The deliberate choice to

reduce personal trust, although a significant concern for OrgA as it hampers collaboration in

the relationships suggests that personal trust plays an inferior role to organizational trust in

supporting the collaborative nature of interorganizational relationships. This support Zaheer

et al’s (1998) study which found that the influence of personal trust on the nature of a business

relationship is limited and subordinated to organizational trust.

Consequently, in collaborative relationships, the use of EM is marked by trade-offs between

different functionalities. Organizations balance their objectives, and assess the outcomes that

the content, commerce and collaborative EM functionalities have on these objectives. This bal-

ancing between the different outcomes of EM functionalities on the overall objectives of the

organizations governs the way organizations use EM applications in their collaborative

relationships.

In contrast, in the transaction models, transaction costs reduction is the primary intended

outcome of EM use. The reduction in personal trust which occurs as a result of commerce func-

tionality such as electronic billing is acknowledged as a side-effect of EM use, but is not con-

sidered as a significant outcome. As the relationships are transactional, personal trust is not a

relevant variable in the exchange (Morgan & Hunt, 1994; Lambe et al., 2001). Therefore, the

use of transactional EM does not involve trade-offs, as the primary focus is on deploying com-

merce functionalities to reduce transaction cost.

The study also finds that as suggested by Clemons et al. (1993), EM use lowers transaction

risks in the collaborative model. Collaborative functionalities such as shared databases reduce

operational risks by enabling better control over the information exchanged, whereas the ability

to customize the EM to increase the partner’s switching costs improves the bargaining position

of the organization developing the EM and thus reduces opportunism risks.

Evidence that EM support organizational goodwill trust is also found in the collaborative

model, through the use of collaborative functionalities such as shared databases, and through

the use of content functionalities such as discussion forums. The explanation of the later is that

such information sharing enables the organization to build and maintain a sense community



339

within its customer users which enhances trust in the organization that manages such com-

munity, as suggested by Luo, (2002). In line with previous studies (Hart & Saunders, 1998; Gal-

livan & Depledge, 2003), in the collaborative model, EM use was found to sustain organization

trust through increasing the amount of confidential information exchanged between parties and

through enhancing the transparency of the service.

5. CONCLUSIONS AND FUTURE RESEARCH

This article investigated the outcomes that EM use has on collaborative and transactional rela-

tionships between buyer and seller organizations by addressing the transaction cost and trust

dimensions together.

The study is based on a multi-case study research design that has a number of limitations.

First, the study includes only dyadic relationships between buyers and sellers that are analysed

only from the perspective of the organization under study. However, the objectives that orga-

nizations pursue in their interorganizational relationships and the trade-offs that govern the use

of EM in these relationships might depend on the wider internet-worked context in which orga-

nizations currently operate (Castells, 2000). Additionally, the perspective of the other party

regarding the outcomes of EM use and the trade-offs that they are prepared to accept are not

taken into account. For this reason, the study provides only a limited view on the EM use in

interorganizational relationships, and has to be extended by assessing the objectives and the

trade-offs that both partners have to make in their usage of EM. Secondly, the nature of ser-

vices transacted over the EM in the two cases is different which might affect the level of trans-

action costs. Consequently, future research is required to test the wider applicability of the

findings. Such studies should include a wider range of organizations, should address the net-

work level of EM use and, most importantly, should include all the partners involved in a par-

ticular instance of EM use.

Notwithstanding these limitations, this study bring three significant contributions to the IS

literature.

First, a thorough investigation of the role that trust together with transaction costs have for

the use of EM is lacking from the mainstream literature, although there have been claims that

these dimensions should be addressed together (Steinfield et al., 1995; Kumar et al., 1998;

Christiaanse & Kumar, 2000). Relying on two in-depth studies of collaborative and transactional

uses of EM, this study explains the outcomes of EM use on collaborative and transactional

buyer–seller relationships by addressing these dimensions together.

Second, the study found that the collaborative use of EM is shaped by the trade-offs that

organizations make between the outcomes that different EM functionalities have on their col-

laborative objectives. Organizations assesses the outcomes that different content, commerce

and collaboration EM functionalities have on their objectives relating to transaction costs and

trust, and selects to use those that allow the best way to achieve them. In contrast, such trade-

offs are not involved in transactional uses of EM, as the main focus here is to achieve trans-

action cost reductions.

R Bunduchi


340

Finally, the study provides empirical support to the assertion that the TCE framework is lim-

ited in its ability to account for collaborative uses of EM, as suggested in previous research

(Kumar et al., 1998; Markus & Christiaanse, 2003).

REFERENCES

Backhaus, K. & Buschken, J. (1997) What do we know

about business-to-business interactions? – a synopsis of

empirical research on buyer–seller interactions. In: Rela-

tionships and Networks in International Markets,

Gemunden, H.G., Ritter, T. & Walter, A. (eds), pp. 13–

33. Elsevier, Pergamon, UK.

Bakos, Y. (1991) A strategic analysis of electronic market-

places. MIS Quarterly, 15, 295–310.

Bakos, Y. (1998) The emerging role of electronic market-

places on the internet. Communications of the ACM, 41,

35–42.

Bakos, Y. & Brynjolfsson, E. (1997) Organizational part-

nership and the virtual corporation. In: Information Tech-

nology and Industrial Competitiveness: How Information

Technology Shapes Competition, Kemerer, C.F. (ed.),

pp. 1–18. Kluwer, Amsterdam, the Netherlands.

Castells, M. (2000) The Information Age: Economy, Soci-

ety, and Culture. Vol. 1: The Rise of the Network Econ-

omy. Blackwell Publishers, Oxford, UK.

Christiaanse, E. & Kumar, K. (2000) ICT-enabled coordi-

nation of dynamic supply webs. International Journal of

Physical Distribution and Logistics, 30, 268–285.

Christiaanse, E., van Diepen, T. & Damsgaard, J. (2004)

Proprietary versus internet technologies and the adop-

tion and impact of electronic marketplaces. Journal of

Strategic Information Systems, 13, 151–165.

Clemons, E.K., Reddi, S.P. & Row, M.C. (1993) The

impact of information technology on the organization

of economic activity: the ‘Move to the middle’ hypothe-

sis. Journal of Management Information Systems, 10,

9–35.

Creswell, J.W. (1994) Research Design Qualitative and

Quantitative Approaches. SAGE, Thousand Oaks, CA,

USA.

Dyer, J.H., Cho, D.S. & Chu, W. (1998) Strategic supplier

segmentation: the next ‘Best Practice’ in supply chain

management. California Management Review, 40, 57–

77.

Easton, G. (1997) Industrial Networks: A review. In: Under-

standing Business Markets Ford, D. (ed.), pp. 102–128.

The Dryden Press, London, UK.

Gallivan, M.J. & Depledge, G. (2003) Trust, control and

the role of interorganizational systems in electronic

partnership. Information Systems Journal, 13, 159–

190.

Garcia-Dastugue, S.J. & Lambert, D.M. (2003) Internet-

enabled coordination in the supply chain. Industrial Mar-

keting Management, 32, 251–263.

Geun Lee, H. & Clark, T.H. (1996/97) Market process re-

eingineering through electronic market systems. Oppor-

tunities and Challenges Journal of Management

Information Systems, 13, 113–136.

Gulati, R., Nohria, N. & Zaheer, A. (2000) Strategic net-

works. Strategic Management Journal, 21, 203–215.

Hart, P. & Estrin, D. (1991) Inter-organization networks,

Computer integration, and shifts in interdependence: the

case of the semiconductor industry. ACM Transactions

on Information Systems, 9, 370–398.

Hart, P.J. & Saunders, C.S. (1998) Emerging electronic

partnerships: antecedents and dimensions of EDI use

from the supplier’s perspective. Journal of Management


Hussey, J. & Hussey, R. (1997) Business Research. Mac-

Millan Business, London, UK.

Kraut, R., Steinfield, C., Chan, A., Butler, B. & Hoag, A.

(1998) Coordination and virtualisation: the role of elec-

tronic networks and personal relationships. Journal of

Computer-Mediated Communications, 3, 1–34.

Kumar, K. & van Dissel, H. (1996) Sustainable collabora-

tion: managing conflict and cooperation in interorganisa-

tional systems MIS Quarterly, 20, 279–300.

Kumar, K., Dissel, H. & Bielli, P. (1998) The merchant of

Prato – revisited: toward a third rationality of information

systems. MIS Quarterly, 22, 199–227.

Lambe, C.J., Wittmann, C.M. & Spekman, R.E. (2001)

Social exchange theory and research on business-to-

business relational exchange. Journal of Business to

Business Marketing, 8, 1–36.

Leek, S., Turnbull, P.W. & Naude, P. (2003) How is infor-

mation technology affecting business relationships?

Results from a UK survey. Industrial Marketing Manage-

ment, 32, 119–126.



341

Luo, X. (2002) Trust production and privacy concerns on

the Internet. A framework based on relationship market-

ing and social exchange theory. Industrial Marketing

Management, 31, 111–118.

Malone, T.W., Yates, J. & Benjamin, R.I. (1987) Electronic

markets and electronic hierarchies. Communications of

the ACM, 30, 484–497.

Markus, M.L. & Christiaanse, E. (2003) Adoption and

impact of collaboration electronic marketplaces. Informa-

tion Systems and E-Business Management, 1, 139–155.

Meier, J. (1995) The importance of relationship manage-

ment in establishing successful interorganisational

systems. Journal of Strategic Information Systems, 4,

135–148.

Miles, M.B. & Huberman, A.M. (1994) Qualitative Data

Analyisis: an Expanded Sourcebook. Sage Publications,

Thousand Oaks, CA, USA.

Morgan, R.M. & Hunt, S.D. (1994) The commitment-trust

theory of relationships marketing. Journal of Marketing,

58, 20–38.

Ngwenyama, O.K. & Lee, A.S. (1997) Communication rich-

ness in electronic mail: critical social theory and the con-

textuality of meaning. MIS Quarterly, 21, 145–167.

Nooteboom, B. (1996) Trust, opportunism and gover-

nance: a process and control model. Organization Stud-

ies, 17, 985–1010.

Pavlou, P.A. (2002) Institution-based trust in interorgani-

zational exchange relationships: the role of online B2B

marketplaces on trust formation. Journal of Strategic


Ratnasingam, P. (2005) Trust in inter-organizational

exchanges: a case study in business to business elec-

tronic commerce. Decision Support Systems, 39, 524–

544.

Remenyi, D., Williams, B., Money, A. & Swartz, E. (2000)

Doing Research in Business and Management. Sage

Publications, London, UK.

Russell, S. & Williams, R. (2002) Social shaping of tech-

nology: frameworks, findings and implications for policy

with glossary of social shaping concepts. In: Shaping

Technology, Guiding Policy, Sorensen, K.H. & Williams,

R. (eds), pp. 37–132. Edward Elgar, Chetlenham, UK.

Sako, M. (1992) Prices, Quality and Trust: Inter-Firm Rela-

tions in Britain and Japan. Cambridge University Press,

Cambridge, UK.

Smith Ring, P. & Van de Ven, A.H. (1992) Structuring

cooperative relationships between organisations. Strate-

gic Management Journal, 13, 483–498.

Smith Ring, P. & Van de Ven, A.H. (1994) Developmental

processes of cooperative interorganizational relation-

ships. Academy of Management Review, 19, 90–118.

Soliman, K.S. & Janz, B.D. (2004) An exploratory study to

identify the critical factors affecting the decision to estab-

lish Internet-based interorganizational information sys-

tems. Information and Management, 41, 696–706.

Srinivasan, S. (2004) Role of trust in e-business success.

Information Management and Computer Security, 12,

66–72.

Stake, R.E. (1995) The Art of Case Study Research. Sage

Publications, Thousand Oaks, CA, USA.

Steinfield, C., Kraut, R. & Plummer, A. (1995) The impact

of interorganizational networks on buyer–seller relation-

ships. Journal of Computer-Mediated Communications,

1, 1–17.

Strauss, A. & Corbin, J. (1990) Basics of Qualitative

Research Grounded Theory Procedures and Tech-

niques. Sage Publications, Thousand Oaks, CA, USA.

Vlosky, R.P., Fontenot, R. & Blalock, L. (2000) Extranets:

impacts on business practices and relationships. Journal

of Business and Industrial Marketing, 15, 438–457.

Williamson, O.E. (1986) Economic Organization Firms,

Markets and Policy Control. New York University Press,

New York, USA.

Williamson, O.E. (1993) Calculativeness, trust, and eco-

nomic organisation. Journal of Law and Economics, 36,

453–486.

Yin, R.K. (1994) Case Study Research Design and Meth-

ods. Sage Publication, Thousand Oaks, CA, USA.

Zaheer, A., McEvily, B. & Perrone, V. (1998) Does trust

matter? Exploring the effects of interorganizational and

interpersonal trust on performance. Organization Sci-

ence, 9, 141–159.

Biography

Raluca Bunduchi is a lecturer in Management at the Busi-

ness School, Aberdeen University. Prior to this, she worked

as a Research Fellow in the Research Centre for Social

Sciences at the University of Edinburgh. She studied for

her PhD in the Department of Management Science at

Strathclyde Business School in Glasgow examining the

use of internet technologies and their implications for the

nature of business relationships within and across organi-

zational boundaries. Raluca Bunduchi can be reached at

[email protected]

ps26

Documents

internet use

electronic markets em

use lowers transactioncosts

transaction costeconomics

transaction costreductions

em players

electronic hierarchies

role of goodwill trust