An Exchange Theory Of Relationships In Online Labor Markets

Advances in information technology have given rise to massive online labor markets populated by millions of freelance contractors around the globe. Today, anyone with an internet connection can hire contractors from these markets for expert work. We develop a theoretical framework for understanding the nature and quality of the relationships formed between these informal client “managers” and online contractors. Our model integrates exchange theory with role theory and research on swift trust to explain when a client-contractor relationship is likely to be low-level, transactional, or generative. Because these relationships are formed under competitive market conditions and carried out entirely online, participants are likely to have misaligned role expectations, with negative consequences for trust. When ongoing interactions affirm or repair trust, the client and contractors may exchange desired social resources, such as mentoring, expanded role scope, and recognition for the contractor, and commitment, communication, and innovative ideas for the client. Otherwise, the relationship is likely to be low-level or transactional, with little growth for either party. Our Client-Contractor Exchange model offers a theoretical foundation for understanding the online market-based relationships proliferating in the “gig” economy.