Buyer Intention to Use Internet-Enabled Reverse Auctions: The Role of Asset Specificity, Product Specialization, and Non-Contractibility

35 Pages Posted: 7 May 2008 Last revised: 4 Aug 2014

See all articles by Sunil Mithas

Sunil Mithas

University of Maryland - Robert H. Smith School of Business

Joni Jones

University of South Florida - College of Business Administration

Will Mitchell

Duke University - Fuqua School of Business; University of Toronto - Rotman School of Management

Abstract

IT-enabled exchanges in electronic markets have significant implications for buyer-supplier relationships. Building on studies that emphasize the role of intangible assets in inter-organizational 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 inter-organizational 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.

Keywords: Reverse Auctions, Procurement auctions, Electronic Markets, Transaction cost economics, Inter-organizational relationships, Buyer-supplier relationships, Incomplete Contracts Approach, Non-contractibility, Business-to-business auctions.

JEL Classification: C93, M1, L22

Suggested Citation

Mithas, Sunil and Jones, Joni and Mitchell, Will, Buyer Intention to Use Internet-Enabled Reverse Auctions: The Role of Asset Specificity, Product Specialization, and Non-Contractibility. MIS Quarterly, 2008 ; Robert H. Smith School Research Paper No. RHS 06-070. Available at SSRN: https://ssrn.com/abstract=1129085

Sunil Mithas (Contact Author)

University of Maryland - Robert H. Smith School of Business ( email )

​Van Munching Hall
7699 Mowatt Ln
College Park, MD 20742-1815
United States

HOME PAGE: http://sunilmithas.com/

Joni Jones

University of South Florida - College of Business Administration ( email )

4202 E. Fowler Avenue, BSN 3403
Tampa, FL 33620-5500
United States

Will Mitchell

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States

University of Toronto - Rotman School of Management

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

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