Effect of Network Relations on the Adoption of Electronic Trading Systems

Working Paper #20 by Ali Reza Montazemi, John J. Siam, and Akbar Esfahanipour, June 2007.

• Information systems can intermediate between buyers and sellers.
• Electronic marketplaces lower buyers' cost of learning prices and offerings.
• The 45 trillion-dollar fixed-income market still made little use of them.

Method and findings

• Face-to-face interviews covered 90 senior managers and traders at 25 institutions.
• The study examined social capital in interpersonal market networks.
• Embedded interpersonal ties let participants exploit information asymmetry.
• Electronic trading conflicts with existing norms for large transactions.

Keywords: information flow, alternative trading systems, IT-mediated network ties, embedded relationships.