Codi ability, Relationship-Speci c IT Investment, and Optimal Contracting

The last few years have seen on one hand an explosion in the number of emarketplaces, including a variety of electronic exchanges in the B2B arena, and on the other hand the closing of or near collapse of several prominent exchanges (e.g., Chemdex/Ventro). The question addressed in this paper is what are the underlying factors that a ect which transactions are likely to be supportable by e-exchanges. In particular, we identify and study three factors, supplier management, idiosyncratic investments in information systems, and codi ability (i.e., digitalizability) of product and order-ful llment speci cations underlying transactions. We show that transaction codi ability plays a fundamental role in in uencing the nature of sustainable contracting and IT investments in e-markets. In addition, the framework we developed integrates several perspectives, often in tension, concerning the nature of forward and options contracts as mutually supporting elements of an optimal portfolio of long-term sourcing in B2B markets with less than perfect codi ability. (Codi ability; B2B Sourcing; Supplier Management; Relationship-Speci c IT Investment)

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