Relationships, Services and the Question of Ownership A Neo-Institutional Economic Interpretation of Business Relationships in the Service Industry

The often mentioned but never deeply investigated service characteristic of "no transfer of ownership" is a starting point for a property-rights based foundation of business relationships in the service industry. Looking at the distribution of property-rights between customer and service provider the service exchange could be regarded as an economic relationship in the sense of a limited in time transfer of certain kinds of property-rights: "Usus", "Fructus", "Abusus". The ownership determining right of selling all these rights to third parties will remain unchanged. By including the ownership related aspect of externalities a classification of transactions can be developed that integrates the whole service sector including information related services and services provided by non-profit organisations and the government, within one theoretical concept. Therefore relationships seem to be a necessary by-product of the economic features of services in terms of a contractual relation. However, relationships in services still remain a design variable for the service provider. No transfer of complete ownership creates serious incentive problems and the problem of being "locked in" due to dedicated investments and sunk costs. Both will cause serious behavioural uncertainty and safeguarding against opportunistic behaviour induces transaction costs. In order to promote and facilitate service transactions a service provider have to choose appropriate institutional designs of governance mechanisms that mitigate these economic consequences.