Governance Mechanisms in Business-to-Business Electronic Markets

Abstract
Rather than relying on traditional relational exchanges, recent technological advances have made it feasible for firms to undertake market-based transactions through information technology㤼㸶mediated electronic markets. The success of such business-to-business electronic markets depends on the governance practices of the market maker㤼㸷that is, the firm that manages and administers the electronic market.Market makers use three governance mechanisms to manage electronic markets: (1) monitoring the market participants (i.e., buyers and sellers that participate in the market), (2) building a sense of community among market participants to instill mutual respect and trust, and (3) self-participating in the electronic market to build know-how about how the market functions. Building on transaction cost analysis theory, the authors suggest that the influence of these governance mechanisms on electronic market performance (i.e., meeting strategic and financial objectives) depends on behavioral and external uncertainty in the market. Survey data from market makers show that (1) monitoring is effective for reputed market makers and when demand uncertainty is high, (2) community building is beneficial when pricing is static rather than dynamic, and (3) self-participation is useful when the market maker is well reputed and when the market relies on dynamic pricing.

Keywords: business-to-business marketing, electronic markets, governance mechanisms, performance, uncertainty

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s