The non-market preconditions of electronic markets: Implications for their evolution and applicability

This article asks which institutional structure is required for electronic markets to emerge. It proposes the adoption of a rather narrow concept of electronic markets, one which requires that electronic markets support the negotiation phase of a business process in order to identify those preconditions that are specific to electronic markets as compared to other inter-organizational systems. A theoretical framework is elaborated which distinguishes between the institutional regime shaping market participants’ transaction behavious, a set of meta-activities which establish and maintain the institutional regime, and a generative regime, which is the group of actors performing or promoting meta-activities. All three components constitute the notion of non-market preconditions of market systems, whether electronic or conventional. This theoretical concept is then used to identify the specific non-market preconditions of electronic markets in each of the three distinct categories. In the concluding section, the findings are related to the way in which electronic markets actually evolve and the areas of economic activity in which they provide a useful coordination instrument and in which they do not.