Academic journal article Journal of Theoretical and Applied Electronic Commerce Research

The Logic of Electronic Hybrids: A Conceptual Analysis of the Influence of Cloud Computing on Electronic Commerce

Academic journal article Journal of Theoretical and Applied Electronic Commerce Research

The Logic of Electronic Hybrids: A Conceptual Analysis of the Influence of Cloud Computing on Electronic Commerce

Article excerpt

Abstract

This paper extends the on-going analysis of the electronic markets hypothesis by offering a complementary hypothesis, namely, the electronic hybrids hypothesis. In a seminal 1987 article, Malone, Yates, and Benjamin predicted an overall shift toward proportionately more use of electronic markets rather than electronic hierarchies. However, critics of this hypothesis have highlighted various factors that are responsible for its limited predictive validity, in particular for electronic business-to-business (B2B) commerce. This paper revisits transaction cost economics and the electronic markets literature to identify five inhibiting factors that have led to a much narrower shift than that predicted by the electronic markets hypothesis. The main argument developed in this paper is that the growing use of cloud computing is expected to mitigate those inhibiting factors and consequently lead to a further shift toward electronic markets. However, because the inhibiting factors are mitigated, but not eliminated, cloud computing has the potential to shift electronic B2B commerce toward more open, loosely-coupled exchanges, without electronic markets becoming the dominant mode of governance.

Keywords: Electronic commerce, Cloud computing, Electronic markets, Transaction cost economics, Conceptual analysis

1 Introduction

In a seminal paper on the impact of information technology (IT) on the organization of economic activity, Malone, Yates, and Benjamin [28] predicted an overall shift toward proportionately more use of electronic markets rather than electronic hierarchies. This electronic markets hypothesis was justified by two effects of IT on the nature of economic transactions. The first is a reduction in coordination costs, including transaction costs of searching for trading partners, exchanging information, negotiating contracts, and controlling performance. The second effect is a reduction in asset specificity (the extent to which an asset cannot readily be used by other firms) and in the complexity of product description. As markets are considered disadvantageous in transaction costs and less efficient for asset-specific and highly-complex transactions, the effects induced by IT of reducing these three elements are expected to foster a shift toward more use of markets.

Despite its popularity, critics of the electronic markets hypothesis have argued that it fails to consider the dynamic and relational environment in which IT is being used [11]-[12], [18], [20]. In particular, the hypothesis fails to explain how business-to-business (B2B) relationships evolve over time as a consequence of such elements as switching costs, exchange frequency, and trust [17]. Other critics have highlighted the importance of such elements as transaction economies of scale and learning curve effects that favor a move toward long-term relationships with a smaller set of suppliers [8]. These critiques are consistent with evidence showing that most electronic B2B commerce is conducted via private supply chain platforms that are owned by a single purchasing firm (such as Wal- Mart or Procter & Gamble) on the basis of its enterprise resource planning (ERP) system. These private platforms are responsible for about 75% of all B2B expenditures by large firms, far exceeding the expenditures for all forms of electronic markets [23].

The purpose of this paper is to extend the analysis of the electronic markets hypothesis by offering a complementary hypothesis, the electronic hybrids hypothesis, which explains how electronic commerce will be affected by the recent advent of the cloud computing paradigm. We begin by revisiting the literature on transaction cost economics to identify a general typology of governance structures that extends the simplistic distinction between hierarchies and markets. This broader typology is then employed to describe the past and future trajectories of electronic B2B transactions. In particular, it is argued that distinct characteristics of IT, denoted here as inhibiting factors, have led to a much narrower shift than that predicted by the electronic markets hypothesis, namely, a shift from electronic hierarchies to electronic relational hybrids. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.