Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Working Knowledge
Business Research for Business Leaders
  • Browse All Articles
  • Popular Articles
  • Cold Call Podcast
  • Managing the Future of Work Podcast
  • About Us
  • Book
  • Leadership
  • Marketing
  • Finance
  • Management
  • Entrepreneurship
  • All Topics...
  • Topics
    • COVID-19
    • Entrepreneurship
    • Finance
    • Gender
    • Globalization
    • Leadership
    • Management
    • Negotiation
    • Social Enterprise
    • Strategy
  • Sections
    • Book
    • Podcasts
    • HBS Case
    • In Practice
    • Lessons from the Classroom
    • Op-Ed
    • Research & Ideas
    • Research Event
    • Sharpening Your Skills
    • What Do You Think?
    • Working Paper Summaries
  • Browse All
    Electronic Hierarchies and Electronic Heterarchies: Relationship-Specific Assets and the Governance of Interfirm IT
    13 Feb 2007Working Paper Summaries

    Electronic Hierarchies and Electronic Heterarchies: Relationship-Specific Assets and the Governance of Interfirm IT

    by Andrew McAfee, Marco Bettiol and Maria Chiarvesio
    Scholars have long been interested in the impact of information technology on the organization of work. As Andrew McAfee and colleagues argue in this study, the appropriate governance mechanism for an IT-facilitated collaboration depends on the type of IT being deployed: When an enterprise technology is required, so is an electronic hierarchy. The paper explores the issue of relationship specificity of IT assets, proposes a categorization of information technologies based on their levels of relationship specificity, and uses data from more than forty Italian industrial districts to test three hypotheses around governance of interfirm IT. These districts typically have close ties, both horizontal and vertical, and have historically worked in close collaboration with each other. Key concepts include:
    • When an enterprise technology is required, so is an electronic hierarchy.
    • Future research could reveal if there is a general pattern in relationship-specific investments and how entities other than powerful incumbent firms can successfully build electronic hierarchies.
    • Future research could also help define the full spectrum of IT-based interactions and the appropriate governance mechanisms for each.
    LinkedIn
    Email

    Author Abstract

    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. This contingent theory yields three hypotheses, which are tested using data gathered from firms in Italian industrial districts. Because of this paper's focus on governance rather than price-setting, electronic hierarchies are contrasted not with electronic markets, but instead with electronic heterarchies.

    Paper Information

    • Full Working Paper Text
    • Working Paper Publication Date: January 2007
    • HBS Working Paper Number: 07-046
    • Faculty Unit(s): Technology and Operations Management
      Trending
        • 17 Jan 2023
        • In Practice

        8 Trends to Watch in 2023

        • 24 Jan 2023
        • Research & Ideas

        Passion at Work Is a Good Thing—But Only If Bosses Know How to Manage It

        • 25 Jan 2022
        • Research & Ideas

        More Proof That Money Can Buy Happiness (or a Life with Less Stress)

        • 25 Feb 2019
        • Research & Ideas

        How Gender Stereotypes Kill a Woman’s Self-Confidence

        • 10 Jan 2023
        • Research & Ideas

        How to Live Happier in 2023: Diversify Your Social Circle

    Find Related Articles
    • Infrastructure
    • Technology

    Sign up for our weekly newsletter

    Interested in improving your business? Learn about fresh research and ideas from Harvard Business School faculty.
    This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
    ǁ
    Campus Map
    Harvard Business School Working Knowledge
    Baker Library | Bloomberg Center
    Soldiers Field
    Boston, MA 02163
    Email: Editor-in-Chief
    →Map & Directions
    →More Contact Information
    • Make a Gift
    • Site Map
    • Jobs
    • Harvard University
    • Trademarks
    • Policies
    • Accessibility
    • Digital Accessibility
    Copyright © President & Fellows of Harvard College