Blockchain: Effects in Transactions Costs from Information Governance.

Autorda Silva Momo, Fernanda
CargoResearch Article

INTRODUCTION

Blockchain technology emerged in 2008, from the development of a solution to eliminate the intermediary in financial transactions, which is currently recognized as the Bitcoin cryptocurrency (Nakamoto, 2008). In this way, far beyond the cryptocurrency itself and the solution to the intermediary's problem, a new type of distributed database was developed called blockchain, in which transactions are securely included, permanently, using cryptography (Atzori, 2015; Lucena, Binotto, Momo, & Kim, 2018; Wright & Filippi, 2015). With this new technology, characteristics such as the disintermediation of transactions and the security in the bookkeeping of transactions allow organizations that provide a certain service or product--based on a relationship of trust between buyer and seller--to be susceptible to the impact created by blockchain on business. This effect occurs not only because of the market disruption, but also because it offers new opportunities to create value in an appropriate business model to exploit this technology (Cohen, Amoros, & Lundy, 2017). Considering its specific characteristics that differentiate such technology from existing ones and by having great application possibility and influence in business, one can observe an increase in academy interest for this new technology.

When looking at the area of applied social sciences, it is clear that the main topics addressed are: regulation of this technology for greater impact and corporate use; use of blockchain technology as a record base that can assist in the development of sharing services (shared economy); study of blockchain and its effectiveness in relation to the issue of fraud in the context of online transactions; and motivations of the banking sector for implementing blockchain strategies (Cai & Zhu, 2016; Guo & Liang, 2016; Lemieux, 2016; Sun, Yan, & Zhang, 2016; Wang, Chen, & Xu, 2016; Yeoh, 2017; Zhu & Zhou, 2016). Thus, it is clear that most of the debates developed in studies focus on the benefits and challenges of possible scenarios for the adoption and use of this technology, requiring "a comprehensive understanding of the terms of application and use cases" (Risius & Spohrer, 2017, p. 390). In such a way, in order to move forward with its dissemination, "research should investigate the costs and benefits of blockchain, and not just focus on improving ease of use" (Risius & Spohrer, 2017, p. 401). Another gap highlighted in the literature on this topic is that there are only few studies and contributions about the disruptive potential of blockchain technology that cross the domains of IT (Beck & Muller-Bloch, 2017) and focus on a broader approach in organizations.

It is understood to be relevant to explore the impact of using blockchain on business, considering the consequences that its use can bring to contemporary business processes and models (Avital, Beck, King, Rossi, & Teigland, 2016; Beck, Czepluch, Lollike, & Malone, 2016; Lindman, Rossi, and Tuunainen 2017). Moreover, as "most existing research focuses on platform resources and use cases, there is a real need for the [information systems] field to address the social implications of technology and the changes brought about by use cases for business models" in which blockchain is used (Beck, Avital, Rossi, & Thatcher, 2017, p. 383).

In order to explore this theme and the consequences of its use from an organizational perspective, this study proposes a discussion between blockchain and two theoretical approaches: transaction cost theory (TCT) and information governance (IG). In the TCT, the reason why organizations exist is discussed, which, for Coase (1937), occurs because the costs of managing economic transactions outside organizational limits are higher than those managed within. In addition, some behavioral assumptions and critical dimensions mediate the choice of the organization in producing inside or outside its limits, as a solution to deal with questions such as the uncertainty that the economic actors face to carry out transactions (Williamson, 1985). For this reason, it is necessary to understand the influence of using blockchain to minimize costs in economic transactions outside the limits of the organization.

The information governance (IG) has as its objective to guarantee the "accuracy, integrity, accessibility, and security" of the information, and, to achieve this, it is necessary for a company to have "[specific] structures and processes to manage the total life cycle of the information" (Earley, 2016, p. 17). When an organization seeks to carry out the core activity of the IG, it must address different domains in the information systems (IS) field, such as: information security; and quality of information and privacy, considering their policies, procedures, and technologies (Brown & Toze, 2017; Khatri & Brown, 2010; Young & McConkey, 2012). For this reason, it is essential to be aware of the influence concerning the use of blockchain in the face of IG.

Considering the relations shown between blockchain and the two theoretical approaches presented (TCT and IG), and in order to give greater attention to the impacts that this technology can cause to business, the present research aimed at analyzing the effects of adopting the blockchain in information governance and in transaction cost.

It is noteworthy that it is expected to contribute with what was highlighted by Risius and Spohrer (2017), who suggest investigating the costs and benefits of blockchain, bringing in the perspective of transactional costs in economic exchange relationships. Still, Rasouli, Eshuis, Grefen, Trienekens, and Kusters (2017) highlight the information as being an important resource to the organization, requiring mechanisms to support the quality and to protect the information from opportunistic behaviors. Therefore, we seek to present how the adoption of blockchain can influence the theoretical construct of information governance and transaction cost in order to facilitate economic exchanges, while its adoption would imply an improvement in the protection and quality of information.

PROPOSED MODEL

This section presents the concepts and characteristics of blockchain alongside with the transaction cost theory and with the information governance, which assist the proposing model to be tested.

Blockchain and transaction cost theory

As Tapscott and Tapscott (2017) explained, it is believed that, by having a potential to transform the way businesses are organized and managed, blockchain will allow the minimization of transaction costs and the use of resources outside the firm as easily as using resources within the firm. (Tapscott & Tapscott, 2017). In fact, Tapscott and Tapscott (2017) claim that transaction costs will be 'eliminated' (and not minimized). However, only a technology such as blockchain would be unable to deal with all the complexity of factors that would 'eliminate' or cause transaction costs to cease to exist altogether. In any case, the minimization or elimination of transaction costs occurs in this idea, since the principles of blockchain would allow to mitigate the effect of bounded rationality and opportunism, as well as modify the way in which transactions operate (influencing the critical dimensions of transactions).

The existence of behavioral assumptions in the transaction cost theory (TCT) exposes the relevance of the firm's presence, given that, if these did not exist, the transactions could all be carried out in the market (Coase, 1937). In an economic transaction, there are always, at least, two economic agents/actors who can behave during this transaction, in view of TCT's behavioral assumptions, with bounded rationality and opportunism. Bounded rationality is understood as a human condition related to cognitive limitations (Simon, 1978). In regard to transactions, this condition does not allow all variables to be mapped in the existence of contracts with unlimited complexity, that is, it is not possible to predict all situations that could affect the contract in the face of uncertainty (Barney & Hesterly, 2004; Williamson, 1975; 1985). It is emphasized that the use of blockchain would not necessarily decrease this human cognitive limit, considering that this technology does not intend to directly assist the decision-making, but to provide a more reliable way of transacting without needing an intermediary (Nakamoto, 2008).

With regard to opportunism, it reinforces the need for formal bookkeeping of transactions, because, due to its existence, the execution of informal contracts becomes fragile (Barney & Hesterly, 2004). Opportunism is related to information asymmetry and its use to achieve an advantage (Williamson, 1985). It is reinforced that the use of blockchain, as in the case of bounded rationality, would not act directly to reduce the use of information asymmetry in the negotiation of a contract in order to obtain any advantage, but would help the bookkeeping of transactions, just as a contract, would be safe and immutable (Jeppsson & Olsson, 2017; Nakamoto, 2008; Tsai, Blower, Zhu, & Yu, 2016; Tschorsch & Scheuermann, 2016; Yli-Huumo, Ko, Choi, Park, & Smolander, 2016). Therefore, in relation to behavioral assumptions, the use of blockchain would have an indirect influence.

With respect to the critical dimensions to transcribe the transactions (uncertainty, frequency, and asset specificity), only two dimensions (uncertainty and asset specificity) are focused to describe the possible effect that the use of blockchain would have in these dimensions. This is because, according to many authors, frequency is totally related to two other dimensions, without needing to be mentioned separately (Barney & Hesterly, 2004; Fiani, 2013; Liang & Huang, 1998).

Uncertainty is the dimension related to information asymmetry, and contracts are the way in which organizations try to minimize this factor that may be related to inputs for the...

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