Market microstructure in a global B2B network

On-line marketplaces raise several interesting issues, among them the relevance of location when content is digitized, and the assessment of a supplier's capabilities when buyers worldwide only have electronic contact with sellers. In global B2B on-line marketplaces, market microstructures, i.e. which firms compete for the same customers, are thus likely to be influenced by how customers value location and firm capabilities in their decisions to do business with different suppliers on-line. We suggest that both these sets of attributes will continue to matter on-line - firms possessing similar capabilities, as well as firms that are similar in location by country, time zones or clusters, will compete for business from the same customers. We model the similarity in competitive positions between pairs of firms based on the overlap in their customer networks, using data on actual interactions between supplier and customer banks on an electronic trading system. Using QAP network regression techniques on the 100 largest banks in this industry, we find that similarity in capabilities influences who competes with whom, and that location still matters in a global B2B exchange. Interestingly, location influences who a firm's competitors are, but not where its customers are from.