Electronic hierarchies and electronic heterarchies
Subtitle: relationship-specific assets and the governance of interfirm IT
By: Andrew McAfee, Marco Bettiol, and Maria Chiarvesio
Contributors: Bettiol, Marco; Chiarvesio, Maria; Harvard Business School. Division of Research
Series: Working paper / Division of Research, Harvard Business School -- 07-046; Working paper (Harvard Business School. Division of Research) -- 07-046
Publisher: Division of Research, Harvard Business School
Published: 2007
Place of publication: Boston]
Language: eng
Number of pages: 50
Description: This paper uses concepts from the theory of the firm and MIS research to argue that some types of information technology (IT) will be deployed only within hierarchical governance structures. This argument introduces a contingency into the 'electronic markets hypothesis,' which holds that greater use of IT is unidirectionally associated with reduced use of hierarchies. We revisit the assumption that interfirm IT is never a relationship-specific asset. While many types of interfirm IT are highly redirectable others are not, and become relationship-specific assets once configured for a particular context; these assets are referred to here as enterprise information technologies. Because complete contracts over IT assets are not possible, relationship specificity is an important consideration; scholarship on the theory of the firm yields a consistent prescription that when assets are relationship specific and contracts incomplete, the single decision-making authority of a hierarchy is optimal. The paper therefore argues that when enterprise IT is required, so is an electronic hierarchy: a collaboration in which one member has all required decision rights over jointly used IT.
Notes: Includes bibliographical references.