Electronic Negotiation and Relationship: Corporate-Bank Relationship Consequences of Electronic Reverse Auctions

Abstract

Corporate-Bank relationships develop organically over time as a result of a number of factors, including such disparate elements as simple longevity, frequency of contact, full and effective communication, efficient and satisfactory service, and a range of human factors that are based round the skills and personalities of bank and company staff, and their ability to interact on a personal level and it is a crucial element in negotiation. However the use of electronic reverse auctions (eRAs) by buying organizations has increased dramatically over the past five years and has modified the buyer-supplier relationship. In the bank & mutual funds area, the company Bfinance, established in 1999, manages the only one European eRA finance platform and during the course of 2003 and 2004, they have conducted over 100 fund manager search and selection engagements for some 60 clients among Europe's largest Pension Funds, Local Authorities and Institutional Investors, involving assets under management in excess of 12 billion Euro. While recently some researchers begin to examine the relationship consequences of eRA use, we are unaware of any research which has investigated the ensuing impact of perceptions of opportunism and trust on other relationship outcomes such as conflict, commitment, and, in the end, performance in the context of corporate-bank eRA. On top of that, there was no research on corporate-bank relationship consequences of eRA. Thus the motivation of our research is to extend the findings of researchers on buyer-supplier relationship, by examining how eRA usage affects bank performance, through the effects of opportunism and trust, along with commitment and conflict. The author's findings suggest that increased levels of opportunism harm bank non-price performance, through both their short-term impact on dysfunctional conflict and their long-term effects on relationship trust and commitment.