Interpreters of TCE have assumed that Ecom brings about a frictionless (Brynjolffson & Smith, 1999) or transactions-cost-free market. They have wrongly committed TCE to such an explanation and this is my first objection. Second, reduction of transactions cost would increase efficiency and would not increase the rate of profit or capital and would not hasten innovation. About my first objection I must point out that TCE refers not to an accounting cost in an economy, instead it refers to cost due to opportunism or due to increased difficulties in protecting one’s property rights. Cost of information is an additional element. Read the rest of this entry »
Production organization of a vertically integrated corporation stood upon standardization. Production of apiece products with variegated quality, chosen often by the buyer herself, demands that the entire chain of logistics and the supply chains get linked to the electronic commerce platform and that the stages in production are increased immensely and at each step of production each apiece product contains unique information. This has resulted in enrichment of information and subsequent differentiation of previously firm-internal business activities. This is a classic example of increasing return-based expansion in Read the rest of this entry »
Evidences of re-intermediation are in plenty. There are, however, other related changes in the market, such as in the emergence of a novel framework of liability (Valimaki & Martikainen, 2001), or the emergence of new relationships between the wholesaler and the retailer (Nettesine & Rudi, 2000), or in offerings of greatly dispersed prices (Pan, Ratchford & Shankar, 2001). Several databased searches and research on price offerings on the electronic commerce have shown that prices offered on Internet are often not lower than other modes of retail sales. Internet pricing has shown personalized effects based on quality differentiation Read the rest of this entry »
Sarkar et al. (1995) indicated that Ecom necessarily engenders mediation in the following areas of search and evaluation, needs assessment and product matching, customer risk management, product distribution, product information dissemination, purchase influence, provision of customer information, producer risk management, and transaction economies of scale and for integration of customer and producer needs. This detailed listing appears to cover the three modes described by Schmitz (2000). Meck (2001), for example, indicates three groupings of cybermediation, which are aggregation of buyer demand and seller products, Read the rest of this entry »
Issues have been conflated here, however. Accounting costs have wrongly been assumed to represent the costs of transaction. TCE argues (Williamson, 1975) that transaction costs arise because parties in an exchange behave opportunistically. The cost necessary to overcome opportunism or in other words, costs borne to protect property rights when an opportunistic exchange partner is faced (Barzel, 1989) is known as the transaction cost. It follows that in Ecom where parties may not transact repeatedly or do not have trust Read the rest of this entry »
Ecom and the diffusion of information technology, in general, have been believed to contribute to transformation of value chains internal to a firm and to an industry (Porter, 1985). Such a value chain recognizes the vertical dimension and refers to an industry segment. It was argued (Malone, Yates & Benjamin, 1987) that consequent to transformation of inter-linkages there would be dis-intermediation or the shortening of the circuit in the market. A comparison between the two modes of reaching customers seemed inevitable (Brynjolffson & Smith, 1999). It was believed that the end result of disintermediation Read the rest of this entry »
Consequently, it is necessary to have good measures of equity risk for managers, planners and investors. The cost of equity is important in valuing new investment opportunities and in evaluating the ongoing performance of established business projects. This is especially true in the new economy IT industry where an understanding of equity risk aids in the examination of the relationship between the IT sector and economic development. Read the rest of this entry »