Academic journal article Journal of Small Business Management

Bartering: A Creative Management Technique

Academic journal article Journal of Small Business Management

Bartering: A Creative Management Technique

Article excerpt



Prior to the evolution of money as a medium of exchange, transactions necessarily involved an exchange of what one had for what one needed or wanted. These exchanges, or "barters," were simple purchase and sale transactions as we know them today. The only difference was that in the absence of money, goods and services were exchanged for other goods and services rather than cash.

The purpose of this article is to discuss selective aspects of bartering as it is used as a legal, organized marketing tool within the United States. The term "bartering" is defined as the exchange between parties of goods and services of equal value. This discussion is intended to provide insight into an often overlooked way of transacting business. Bartering is not suggested as a substitute for cash transactions, but as a supplemental means of doing business.

Proponents of barter insist that they hold no vendetta against money, which is an absolute necessity in our society, at least for such things as tips, public telephones, vending machines, and, of course, taxes. They do, however, believe that bartering is firmly entrenched as a legitimate and valuable means of effecting economic exchange. It is estimated, for example, that 65 percent of all companies on the New York Stock Exchange now engage in some form of barter. In a recent issue of Forbes magazine, it was stated that "barter is now a fast-growing technique among Forbes 500 firms." Along the same lines, the chief executive officer of a relatively new, multi-million dollar bartering frim was quoted as saying, "In the next ten years the barter economy, through trade exchanges, will be firmly established as the economic system of the future." And, according to the real estate division director of another bartering firm, "Barter is an idea whose time has come--again. We suggest that brokers continue to look for cash in their transactions but consider barter, too."

The resurgence of barter has, however, prompted others to question its importance to the economy. For example, Professor George Dalton of Northwestern University writes:

Barter . . . has never been a quantitatively important or dominant model of transaction in any past or present economic system about which we have hard information.... Barter occurs very widely in past and present economic systems, but always as minor, infrequent, or emergency transactions employed for special reasons by barterers who know of alternative and more important ways of transacting.

In the same vein, a senior writer at Inc. magazine writes:

. . . Barter has earned its place. Like the world's oldest profession, the world's oldest way of doing business will always be with us. It seems unlikely that barter can continue to make inroads into the dollar economy much beyond its present level.

These comments notwithstanding, the number of commercial firms that arrange barters in the United States has increased from about 40 to more than 250 over the last five years, and most appear to be quite successful.


The governments of France, Germany, Japan, and other countries have bartered for centuries. More recently, the United States government has been involved in some barter transactions.

Some U.S. corporate giants have also become involved in bartering, as evidenced by the successful $12 million electronic toys-for-advertising deal that Mattel, Inc., made in order to avoid a $12 million writeoff. The equally well-known Pepsi-Cola-syrup-for-Russian-vodka transaction is another example of corporate leadership and ingenuity. Xerox executed one of the largest domestic barter transactions in September of 1981 when it offered approximately two million dollars' worth of computers and copiers for trading. Companies such as Xerox, Pan Am, Continental Airlines, National Semi-conductor, Chrysler, Shell Oil, and others have all been involved in barter transactions in recent years. …

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