Product complexity and information technology in influencing shifts in transaction governance structure

Transaction structure mediates the exchange of goods or services between business entities. The developments in information technology (IT) have had a profound effect on the shaping and shifting of transaction structure. The major issues in the literature on transaction structure are: (1) How does IT affect the transaction structure? (2) Which direction is transaction structure shifting, towards market or towards hierarchy? (3) What new forms of transaction structure are emerging?;A significant amount of research effort has been directed towards predicting the shifts in transaction structure. However, the discussions are inconclusive, and the predictions are contradictory.;Our theoretical model proposes that product complexity influences the selection of transaction governance structure, and further proposes that the relationship between product complexity and transaction governance structure is moderated by IT. We define the construct of product complexity to include two sub-dimensions---product information intensity and product modularity. The framework developed in this study may be able to reconcile some of the discrepancies among the previous studies and provide a better understanding of the shifts in transaction structure.;To validate the constructs and the theory, an empirical case study is conducted. Three commercial banks participated in the case study. Three types of services, personal checking, mortgage lending and commercial lending, that reflect different degrees of service complexity are investigated. IT advances in the three banks are described and their moderating influence on transaction shifts is explained. The findings from the case study are mapped, and the insights are reported.