Economic effects of interaction. The neglected economy of connectivity

Abstract

Purpose

With a start in the observation that there is a large variation in how companies interact with each other, the paper aims to anlayse the economic consequences of this variation. As the more extensive interaction is costly, the variation also indicates a variation in the economic dimension.

Design/methodology/approach

This is a conceptual paper.

Findings

Three different economic streams can be identified. Firstly, the interaction costs can be reduced by taking advantage of time and scope. Interaction over time give opportunity to use some of the costs as investments through creation of relationships. By using the same counterpart for several products, scope can be used to reduce interaction costs. Secondly, developed business relationships can be used to create relation revenues. The counterparts can use each other for developing better solutions and for development of knowledge. Finally, the actors can also get positive network effects. One example is the joint development with third parties such as sub-suppliers or customer’s customer.

Research limitations/implications

The discussion ends in two major implications. One is the central role of managers and the other the crucial role of economic deals. Managers are crucial both to identify relevant cost and revenue items as well as to exploit them. Deals are important as it is only with direct counterparts where there are monetary streams. In all other relationships, there is only indirect consequences.

Originality/value

It is obvious that the type of cost and revenue streams identified above will require new and different economic tools. A base for this is given here.

Citation

Hakansson, H. and Snehota, I. (2024), "Economic effects of interaction. The neglected economy of connectivity", Journal of Business & Industrial Marketing, Vol. 39 No. 2, pp. 117-123. https://doi.org/10.1108/JBIM-05-2023-0282