Blockchains move beyond cryptocurrencies to aid in more efficient, effective collaborations
Wednesday, April 29, 2020
Blockchains — a cryptography-based decentralized system consisting of an ongoing list of digital records shared within a peer-to-peer network — have drawn public attention mainly from their close ties to cryptocurrencies.
However, a new study co-authored by Fabrice Lumineau, an associate professor of strategic management in Purdue's Krannert School, suggests that their implications go far more beyond such financial applications to organize a wide variety of collaborations in various industries in a new way.
Such a new approach of organizing could bring both efficiency and effectiveness to economic and social activities.
The paper, “Blockchain Governance — A New Way of Organizing Collaborations?” is forthcoming in Organization Science and was co-authored by Oliver Schilke from the University of Arizona’s Eller College of Management. Wenqian Wang, a 2nd-year PhD student at the Krannert School, also contributed to the study.
The researchers advance blockchain governance as a new way of organizing collaborations to achieve both cooperation and coordination, suggesting that in many ways, blockchain governance works fundamentally differently than traditional contractual and relational governance. As a result, blockchains may either complement or replace existing approaches. Blockchains will be particularly useful when transactions are codifiable and parties’ performance are verifiable.
Lumineau says blockchains are one of the most disruptive technological innovations of recent times that may fundamentally change how collaborations are organized. Blockchain governance is qualitatively distinct from both traditional contractual and relational governance as well as from other IT solutions.
"Blockchains offer a novel way to enforce agreements and achieve cooperation and coordination," he says. "We also analyze how blockchains will affect traditional forms of governance — most notably, contractual and relational governance. Finally, we offer an outlook of how blockchains may change the way we organize collaborations more broadly."
According to Lumineau's research, two of the most salient characteristics of blockchains as they pertain to organizing transactions are decentralized consensus and machine-based automation. Blockchain governance will be most appropriate when the requirements of the transaction are codifiable and the performance of the transacting parties is verifiable.
“The main technical features of blockchains enable an original combination of appealing functionalities, such as information immutability and reliability, transparency and traceability of records, and autonomous enforcement of agreements,” he says.
Instead of relying on enforcement through the law or through the value of future relationships, Lumineau says blockchain governance relies on a set of protocols and code-based rules.
The analysis culminates in a research agenda that explores how blockchains may change the way to organize collaborations.
“We consider what different types of blockchains may emerge, who is involved and impacted by blockchain governance, why actors may want blockchains, when and where blockchains can be more effective, and how they influence a number of important organizational outcomes,” Lumineau says. “Such differences generate rich possible avenues for scholars and practitioners to organize collaborations using blockchains.”