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The Role of Internet Technologies in the Management of Business Relationships  


Abstract Category: I.T.
Course / Degree: PhD Management
Institution / University: University of Strathclyde, United Kingdom
Published in: 2004


Thesis Abstract / Summary:

In the Internet-enabled networked economy, a company’s portfolio of relationships becomes a source of competitive advantage. Therefore, the impact that the use of Internet technologies has on the way organisations manage and develop their business relationship is of strategic importance. This research seeks to contribute to the understanding of this phenomenon through the application of a mixed theoretical framework based on Transaction Costs Economics and Social Exchange Theory. The framework analyses the impact of the use of Internet technologies on business relationships based on economic and social rationales. The reduction in transaction costs and the changes in the transaction risks involved in business relationships, which occur because of Internet technologies use, offer an economic explanation to the influence that the use of Internet technologies has on organisations’ choice between competitive and collaborative relationships. The social impact is analysed by identifying the transformations that occur regarding the level of personal and organisational trust, and the balance of dependencies between the parties as a result of Internet technologies use. In addition, the impact that the relational context, i.e. the characteristics of business relationships in which such technologies are used, has on the way organisations use Internet technologies in their relationships is taken into consideration.

The framework is applied using a qualitative multi case study research design. Three case studies were included in the research design, a software company in the telecommunication industry, a consultancy company in the petroleum industry and an integrated UK based utility company. The study led to the development of six generic models and a dynamic model that explain the way organisations use Internet technologies to manage their relationships and support their objectives in their business relationships. Two opposing generic models of Internet technologies use are developed to explain the use of Extranet and online communication media in organisations’ external relationships. The models explain the conditions and the outcomes that the use of Internet technologies has at the level of a single interaction between the parties, at one point in time, in two extreme cases, the collaborative and competitive use. The dynamic model explains the role that organisations assign over time to the use of Internet technologies in their business relationships, and clarifies the crucial role that the trade offs between their various objectives play in this process. The dynamic model also elucidates the vital role that trust between the interaction partners is playing in determining the use of Internet technologies over time. The dynamic model of Internet use is presented in the figure below.

The interactions that happened over time between the parties form the history of the relationship. Based on this history, a certain level of trust develops between partners. The link between the history of the relationship and trust is bi-directional: not only the relationship’s history determines the level of trust existing between two organisations, but also the level of trust resulting from an interaction adds to the history of the overall relationship. Once a new interaction happens between the parties, the result of that interaction will affect the level of trust in the relationship. As the level of trust is altered, the characteristics of the overall relationship will also be affected. In this way, trust is not only a precondition of a new interaction, but also an outcome that adds to the history of the relationship.
Organisations can choose between using competitive (options 2) or collaborative (options 1) options of Internet technologies use or both (option 3) in order to achieve their various objectives, including trust. However, the use of Internet technologies in organisations is characterised by trade offs that have to be made between the different objectives, with trust playing a critical role in this process.

The use of the competitive model will help organisations to achieve some of their objectives (in general transaction costs reductions). However, they will damage the levels of trust in the relationship (the negative link between competitive model and trust). In contrast, the use of the collaborative model will lead to higher levels of trust (the positive link between collaborative model and trust), whilst also allowing organisations to achieve another set of objectives (such as transaction risks reductions and higher switching costs) or damaging others (e.g. increasing the transaction costs). An organisation will thus choose to use a certain set of options of Internet technologies use (collaborative or competitive) in an interaction depending on how it assesses the trade offs involved. These trade offs refer to the choices that the organisation has to make between the outcomes of the different options of Internet technologies use on its overall objectives, and depend on users perceptions and understanding .

A central variable in this choice is the level of trust in the relationship. If the organisation perceives that there is sufficient trust in the relationships such that the negative outcome of the competitive model will still not damage the overall relationship, then a more competitive model will be used for that interaction. In contrast, if the organisation perceives that the existing trust is not high enough then a more collaborative model will be employed for that particular interaction in order to build trust in the relationship. This could also mean that some other objectives (most likely transaction costs reductions) will not be achieved. This balance between the outcomes of the collaborative and competitive models of Internet use on trust governs the way organisations engage in using Internet technologies in their relationships. It is for this reason that the level of existent trust in a relationship determines the use of Internet technologies (the link between trust and the use of Internet technologies).

The other objectives achieved as a result of the use of Internet technologies, in a similar way with trust, will add to the history of interactions and transform the characteristics of the relationship that will determine the future interactions between the parties.
Internet technologies are one tool among many available to organisations to use in order to manage their relationships and achieve their objectives, including trust. In a similar way with Internet technologies, the use of these other tools is rooted in the history of previous interactions, although trust might not be necessarily a variable that directly influences their use. As the use of these other tools influences the objectives in the relationship, their use will affect the model of Internet technologies use. For example, such other tools could be used to support the development of trust between organisations. In this way, the organisation will be inclined to use more competitive like models of Internet technologies use, as their negative outcome on trust will be offset by the positive effect of the use of the other tools. Consequently, Internet technologies are just part of a portfolio of resources that organisations use to achieve their objectives.

In conclusion, there is no single way of using Internet technologies in a business relationship. Hence there is no single role that such technologies play in the management of business relationships. Instead, at different stages during the lifetime of a relationship, organisations select different options of using Internet technologies depending on the trade offs that they make between their different objectives, among which trust plays a critical role. In addition, the use of Internet technologies has to be seen within the larger picture of the portfolio of resources that an organisation uses to achieve its objectives.

In addition, the use of Intranet in internal relationships is compared with the use of Internet technologies in organisations’ external relationships. The comparative analysis shows that the internal use of Internet technologies mirrors the external use, hence suggesting that a common theoretical framework could be used to analyse together both internal and external use of Internet technologies .

The findings of this research support not only the appropriateness of a combined theoretical approach - social and economic – to the Internet research, but also provide organisations with a powerful tool that they can use to develop Internet policies that match and support their overall objectives in their business relationships.


Thesis Keywords/Search Tags:
Internet, ebusiness, business relationships

This Thesis Abstract may be cited as follows:
Bunduchi R., (2004) "The Role of Internet Technologies in the Management of Business Relationships", PhD Thesis, Management Science Department, University of Strathclyde, Glasgow, Scotland

Thesis Images:
I.T. - The Role of Internet Technologies in the Management of Business Relationships Dynamic model of Internet use
(click to enlarge)

 

Submission Details: Thesis Abstract submitted by Raluca Bunduchi from United Kingdom on 29-Mar-2005 10:19.
Abstract has been viewed 3965 times (since 7 Mar 2010).

Raluca Bunduchi Contact Details: Email: bunduchi@yahoo.com



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