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Abstract

Information technology enabled exchanges in electronic markets have significant implications for buyer–supplier relationships. Building on studies that emphasize the role of intangible assets in interorganizational relationships, this study argues that buyers are less likely to use reverse auctions for supplier relationships involving a high degree of non-contractibility. The argument complements traditional transaction cost economics arguments that focus on the impact of asset specificity and product specialization. We identify six dimensions of non-contractibility—quality, supplier technological investments, information exchange, responsiveness, trust, and flexibility—which encompass task-based and interaction-based non-contractibility. The study finds that, together with product specialization, these non-contractible elements of interorganizational relationships have greater explanatory power for reverse auction use than asset specificity. This result highlights the importance of supplier investments in non-contractible elements of exchange relationships in an increasingly dynamic service- and knowledge-based economy.

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