Some propositions regarding the role of information technology in the organization of economic activity

Abstract

Industrial organization /IC)) literature provides a comprehensive treatment o the many factors that affect the costs and risks of transacting to obtain goods and senices. These exogenous factors have caused firms to adopt vertically integrated structures to deal with the increased transactions costs resulting from the presence of these factors. It i s becoming increasingly clear that information technology ( I T ) aflects transactions costs, especially the direct costs of coordinating activities and of monitoring their performance, and the indirect costs associated with inadequate performance. The impact of I T on transactions cost should be more pronounced in situations where the exogenous factors, zdentified by the I O literature, are present to a high degree. This paper discusses how I T can reduce the costs and risks associated vith each of these factors, thereby facilitating the adoption of economically efficient organizational forms. The set of propositions derived from our discussion are largely consistent with our "move to the middlen hypothesis (see 171, and also 191).monitoring capability of I T and the lower relationshipspecificity of I T investments will cause firms to engage in a greater degree of outsourcing; moreover, this increased outsourcing will be from a reduced set of suppliers with whom the firm has long-term cooperative relationships.

The strategic changes by adopting internet‐based interorganizational systems

“…Many studies have investigated the antecedents of EDI use, and outcomes of EDI use (Hart and Saunders, 1998;Srinivasan et al, 1994). Others have focused on specific forms of relationships on the effect of IT on IOS (Bakos and Brynjolfsson, 1993;Clemons and Reddi, 1993;Gurbaxani and Whang, 1991;Holland and Lockett, 1997;Malone et al, 1987). Kumar et al (1998) presented a typology for IOS based on interorganizational interdependence.…”

“…The primary reason is the high entry and running costs especially for small and medium size companies. To establish traditional EDI between both parties requires compatible hardware at both ends in order to have seamless processing (Clemons and Reddi, 1993). The additional costs associated with the VAN services typically fell in the range of USD5,000-6,000 per month (Bartholomew, 1997).…”

Framework for Study of Carrier Strategies in Auction-Based Transportation Marketplace

“…Other investigators suggest the opposite, namely, that the widespread availability of ICTs will reduce the number of suppliers and foster long-term cooperative partnerships (3). These two opposing views lead to the market model and to the emergence of hierarchies, respectively.…”