The role of the internet in business-to-business network transformations: a novel case and theoretical analysis

Abstract

It is widely accepted that the development of electronic commerce and Internet technology has lead to various new opportunities to transform the nature of business-to-business networks, for instance through disinter-mediation, reintermediation and formation of virtual enterprises. However, discussions of the role of the Internet in such transformations in the electronic commerce literature have predominantly focused on the potential of the Internet to reduce transaction costs, particularly search costs. It is now recognised within the strategic management literature that factors other than transaction costs, largely ignored in electronic commerce literature, are important in shaping business-to-business networks. Therefore, this paper seeks to uncover new roles that the Internet can play in the strategic choices for organisations wishing to utilise electronic commerce and Internet technologies. It does this through detailed analysis of the strategic choices of an actual case company, one of which involves Internet-enabled distributed manufacturing, using three widely known theories of strategic choice: Transaction Cost Economics, the Resource-Based View, and Network Theory. Our analysis shows that in addition to its impact on transaction costs, the Internet can also impact on asset specificity of transactions, the imitability of resources, knowledge sharing in relationship management, and the scalability of business strategies. The contribution of this paper is to articulate several novel research propositions concerning the potential of the Internet in the transformation of business-to-business networks.