Virtual Interfirm Relationships: Heterogeneity in the Effects of Dependence Structures on Relational Outcomes

Abstract:     
With the electronic sales channels (i.e., electronic markets) becoming viable alternatives to traditional sales channels, firms interact and transact in these channels and, as a result, develop virtual interfirm relationships, i.e., interfirm relationships that are formed and managed primarily through electronic medium. A firm's participation in the electronic channel depends on its psychological and financial investments in the channel. These investments determine the nature of participation in the channel (which we characterize as the firm being an expert, an explorer, or a passive firm in the electronic channel) and, as a result, the nature of the virtual interfirm relationships the firm develops in the channel. As dependence structures (i.e., a firm's dependence on its partner and the partner's dependence on the firm) form the bedrock of all interfirm relationships and influence relational outcomes; to understand virtual interfirm relationships, we study the moderating role of the nature of firm participation in the electronic channel on the influence of dependence structures on relational outcomes for virtual interfirm relationships. With survey data from firms participating in an electronic market, we use multi-group structural equation modeling to examine the influence of dependence structures on relational outcomes of trust and satisfaction across three levels of firm participation (expert, explorer, and passive firms) in an electronic market. The results support the theoretical conjectures and suggest that the nature of participation in an electronic market moderates the effect of dependence structures on relationship outcomes of trust and satisfaction.

Keywords: interfirm relationships, dependence structures, response surface analysis, multi-group structural equation model

Working Paper Series