The Impact Of Interorganizational Networks On Buyer-Seller Relationships

Throughout the 1980s, widely discussed case examples demonstrated how the use of telecommunications networks to link firms to their suppliers and distribution chains conveyed important first mover advantages to such firms as American Hospital Supply and McKesson.

Abstract

Interorganizational data networks can have two opposing effects on buyer-seller relationships. On the one hand, networks may be used to foster electronic marketplaces characterized by more ephemeral transactions between buyers and sellers. Also plausible, however, is the use of networks to strengthen existing commercial relationships and lock in partners by increasing the costs of switching to new trading partners. Our review of the literature suggests that this latter tendency toward what have been called electronic hierarchies is more prevalent. This paper examines the theoretical rationales behind these competing effects and presents some evidence to show the conditions under which electronic marketplaces or electronic hierarchies are likely to prevail.