Transaction Costs and Information Systems: Does IT Add Up?

Abstract

Transaction cost theory has often been used to support the idea that information and communication technology (ICT) can reduce imperfection in the economic system. Electronic markets and hierarchies have repeatedly been described as solutions to inefficiencies in the organization of transactions in complex and uncertain settings. Far from criticizing this assumption, this paper highlights the limits associated with this application of transaction cost theory that has been prevalent in IS research. Building on the concepts first proposed by Ciborra, the paper argues that information-related problems represent only some of the elements contributing to transaction costs. These costs also emerge due to the interdependencies among the various factors contributing to their growth. The study of the consequences associated with ICT design and implementation, grounded in transaction cost theory, should therefore consider the overall implication ICT has on these interdependences and not only the direct effect it has on information flow, distribution and management. These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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