Coordination costs and ICT investments: an economic analysis

Juha-Miikka Nurmilaakso ()

Netnomics, 2014, vol. 15, issue 2, 57-67

Abstract: This study analyzes how attributes of economic activities are related to information and communication technology (ICT) investments. Since ICT can reduce coordination costs by affecting information processing, communication, delays and errors, coordination cost attributes of the activities can explain these investments. The study focuses on four coordination cost attributes that are the frequency and complexity of the activity and the timeliness and accuracy required in the activity. It introduces the timeliness rate and the accuracy loss. When the expected net present value of the activities and ICT investments has exactly one viable maximum, the ICT investments are increasing with frequency, timeliness and accuracy. Complexity decreases these investments for sure if the marginal costs of the information processing and communication, the marginal duration of the activity and the marginal probability of the erroneous outcome are increasing with complexity. Copyright Springer Science+Business Media New York 2014

Keywords: Coordination costs; Economics of information and communication technology (ICT); Investments; Transaction cost economics (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1007/s11066-014-9086-z

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