Economic returns to firms from business-to-business electronic commerce initiatives: an empirical examination

It is found that the returns to Internet firms are significant while the return to brick-and-mortar firms are not, and it is proposed that the addition of new partners in the EC channel undermines existing relationships in the conventional channel.

Abstract

Do firms derive economic returns from business-to-business (B2B) initiatives? How do returns to startup firms compare to those for established firms in B2B initiatives? How do returns to B2B initiatives around digital goods compare to those involving tangible goods? We offer a rigorous definition of B2B then conduct an empirical test of incomplete contract theory to examine the returns to B2B electronic commerce (EC) initiatives focused on digital goods versus tangible goods, and the returns to Internet firms versus brick-and-mortar firms. While there seems to be little difference between digital and tangible initiatives, we find that the returns to Internet firms are significant while the returns to brick-and-mortar firms are not. We propose, based on the application of incomplete contract theory, that this result obtains because the addition of new partners in the EC channel undermines existing relationships in the conventional channel. At the same time, existing rela- tionships in the conventional channel undermine the quality of new relationships in the EC channel. However, Internet firms, with their single channel focus, avoid this difficultly and thus experience significant returns from B2B EC initiatives.