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The proposed classification scheme is an all-inclusive, two-dimensional typology that covers all types of alternative forms of B2B exchanges. It is robust to encompass the notions of neutrality and bias, and it readily relates to concepts from organizational economics and marketing of fee payment solution. Furthermore, its conceptual simplicity and parsimony make it superior to previous descriptive taxonomies since many factors of interfirm exchange behavior (product, organizational, and market characteristics) can be linked into a coherent theoretical framework. Finally, despite its reliance on a single dimension, the other two fundamental structural dimensions of range and reciprocity can be integrated.

The dimension of range covers vertical markets that deal with industry specific products, and horizontal markets carry products that all industries can use. Despite earlier attempts to classify exchanges as vertical and horizontal, recent findings showed that both types of products are often traded within the same B2B exchange. Based on network externalities, the greater range of products available in the same exchange, the greater benefits a firm receives from streamlining its operations through B2B exchanges dealing with both vertical and horizontal markets. Moreover, the proposed types of exchanges usually reflect the range of products traded. Therefore, there is no need to draw an additional dimension for range when the theory of network externalities dictates that the extant dimensions may cover product type. Similarly, the dimension of reciprocity is related to the number of participating firms. Therefore, the proposed taxonomy also encompasses interfirm reciprocity.

Neutral exchanges are either large-scale marketplaces that enable many buyers to reach many suppliers, or small-scale marketplaces that enable one or a few buyers to reach a small number of selected suppliers. Many-to-many B2B exchanges are usually public markets where firms interact with either a dynamic or static pricing, whereas one-to-one or few-to-few B2B exchanges are usually private, firm-driven markets with negotiated or hierarchical pricing.

B2B exchanges have radically transformed inter firm relations by allowing electronic integration among multiple buyers and sellers where the cost of searching, participating and transacting is sufficiently affordable. Much- too much exchange allows a virtually infinite number of firms to transact electronically with minimal costs. Such B2B exchanges allow buyers to choose among a large number of suppliers for a set of products, whereas sellers have many buyers to promote their products. However, the presence of a great number of firms in this type of exchange precludes strong inter firm relationships.

Despite the lack of high reciprocity, information online fee gateway sharing, feedback mechanisms, and accreditation efforts can be insured through the exchange, which enables a basic level of impersonal trust. Therefore, many to- many B2B exchanges benefit from high reach, whereas they are usually low in the range and reciprocity dimension. Many-to-many exchanges create value by matching many firms through negotiated prices (dynamic pricing), and also by aggregating a large number of firms The matching mechanism is particularly effective in true price discovery, delivery terms, and product quality as firms dynamically interact through the process of supply and demand or the auction mechanism. Aggregation is effective when multiple suppliers post their products through a catalog, and buyers are able to conveniently search for the best prices, quality and delivery terms.

Neutral B2B exchanges with dynamic pricing may be economically efficient, but they are restricted by four factors: reach, range, power asymmetry and reciprocity. First, the availability of trading partners is a crucial issue. If firms do not have the required reach, markets will lack liquidity and will cause uneven pricing and other inefficiencies. Second, only a small number of commodities with simple descriptions can be traded. Product differentiation, which is usually driven by suppliers to gain a ‘niche,’ reduces liquidity. Third, large buyers or suppliers would use their negotiating power to receive better deals rather than getting the market price. Finally, to allow a true liquid and unbiased market, many-to-many exchanges require anonymity.

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