Block-Chain as a Governance Mechanism for Tackling Dysfunctional (Dark Side) Effects in Inter-Organizational Relationships

Abstract

Purpose: The objective of this paper is to study how the emerging block-chain technology can tackle dysfunctional or dark side inter-organizational effects at different stages of the relationship life cycle. The rationale for this study stems from the somewhat paradoxical causes of dysfunctional effects. In particular, variables such as trust and cooperation that typically result in positive relationship outcomes may also lead to negative effects under certain conditions. This contradiction creates a governance headache for organizations in their quest to initiate, develop, maintain, and enhance efficient relationships. Design/methodology/approach: The paper draws upon multiple organizational theories (information asymmetry, agency, transaction cost, and provenance) and the rationale of block-chain technology to develop a set of research propositions. The primary approach of the paper is to develop a conceptual understanding of block-chain as a governance safeguard. Findings: The ledger of a block-chain ledger system distributes trust among multiple participants and keeps dysfunctional effects at bay in inter-organizational relationships. Hence, conventional governance approaches such as strategies for relationship exit can be transformed into value creating endeavors using block-chain. We contrast conventional relationship safeguards with those emanating from block-chain thinking to better inform ex-ante governance strategies. The paper discusses several approaches for future research and articulates a decision framework that can aid managers in their quest to better manage dark side effects. Research limitations: This study is conceptual in nature, and draws upon multiple theoretical perspectives to outline a set of research propositions. Thus, lack of empirical testing of research propositions is a current limitation. Practical implications: Managers can deploy block-chain creatively while selecting inter-organizational relationship partners. For example, provenance issues in organization’ supply chains can be efficiently managed using block-chain. Furthermore, organizations can also create efficient learning around block-chain to gain efficiencies in relationship management. Originality/value: Conventional approaches for managing dysfunctional effects in inter-organizational relationships primarily rely on ex-post governance strategies. In contrast, this paper supplements the extant approach by discussing ex-ante strategies that can be deployed at different stages of the inter-organizational relationship cycle, e.g., initiation, maintenance/development, and termination.