Collocation for supplier-client knowledge-based coordination : niche positioning, task complexity, and comparative costs

We examine how clients and suppliers govern vertical relationships for knowledge work. Collocation - having supplier personnel interact with the client’s personnel and systems at the client's site - is a contractual mechanism that facilitates coordination for knowledge co-creation. Using a sample of 1609 credit unions’ relationships with 50 IT suppliers during the rise of Internet-based banking from 2000 to 2004, we examine the initial development of arrangements for online share account and loan processing. Results show that client positioning and task complexity partially determined the choice of collocation vis-a-vis a supplier delivering standard services from a remote location. However, as broadband communications reduced the costs of remote service, clients moved away from collocation.