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The Effects of Business-to-Business E-Commerce on Transaction Costs

Luis Garicano () and Steven Kaplan ()

No 8017, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In this paper, we study the changes in transaction costs from the introduction of the Internet in transactions between firms (i.e., business-to-business (B2B) e-commerce). We begin with a conceptual framework to organize the changes in transaction costs that are likely to result when a transaction is transferred from a physical marketplace to an Internet-based one. Following Milgrom and Roberts (1992), we differentiate between the impact on coordination costs and motivation costs. We argue that it is likely that B2B e-commerce reduces coordination costs and increases efficiency. We classify these efficiencies into three broad categories (1) process improvements; (2) marketplace benefits; and (3) indirect improvements. At the same time, B2B e-commerce affects incentive costs. In particular, we discuss the impact of the introduction of e-commerce on informational asymmetries. We implement this framework by analyzing detailed internal data from one Internet-based firm to measure process improvements, marketplace benefits, and motivation costs. We present less detailed data and analyses for one other firm. Our results suggest that process improvements and marketplace benefits are potentially large. We find little evidence that informational asymmetries are more important in the electronic marketplace we study than the existing physical ones.

JEL-codes: D2 D4 (search for similar items in EconPapers)
Date: 2000-11
Note: CF IO
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Published as Garicano, Luis & Kaplan, Steven N, 2001. "The Effects of Business-to-Business E-Commerce on Transaction Costs," Journal of Industrial Economics, Blackwell Publishing, vol. 49(4), pages 463-85, December.
Published as The Effects of Business-to-Business E-Commerce on Transaction Costs , Luis Garicano, Steven N. Kaplan. in E-commerce , Borenstein and Saloner. 2001

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Related works:
Chapter: The Effects of Business-to-Business E-Commerce on Transaction Costs (2001)
Journal Article: The Effects of Business‐to‐Business E‐Commerce on Transaction Costs (2001) Downloads
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