E-commerce and Export Performance By Munib Karavdic

Williamson (1975) extended TCE by identifying both the direct costs of the transaction, and the possible opportunity costs of inferior governance decisions. His framework is based on two key dimensions of a transaction: asset specificity and uncertainty. The theory further recognises that the operation of a market is not without cost as is assumed in classical economic theory. The firm becomes a substitute for the market mechanism – created to reduce transaction costs. While the original transaction cost framework propounds a discrete choice between the market mechanism and internal organisation, the current version of the theory acknowledges that features of internal organisation can be achieved without ownership or complete vertical integration (Rindfleisch and Heide 1997). Closely related to the question of asset specificity of a given transaction is the analysis of vertical integration. A typical focus is on a manufacturing firm’s decision to integrate backwards into the supply of materials or components or to integrate forward into distribution and sales.

Recently, researchers have focused on the ways in which investment in information technology can reduce coordination costs and transaction risk (Clemons and Row 1992). In general, organisations that economise on transaction costs can be expected to extract more value from transactions. One of the main effects of utilising an e-commerce environment is the reduction in transaction costs it creates (Dyer 1997). For this reason, the TCE provides critical support to our understanding of value creation utilising e-commerce. Williamson (1983) further implies that a transaction is a discrete event that is valuable in itself, as it reflects the choice of the most efficient governance form, and hence, can be a source of transactional efficiencies. The focus on exchange makes the TCE framework relevant to e-commerce utilisation, including exporters’ faster adaptation to international markets conditions, more efficient search for trading partners / clients (ex ante costs), support of distribution channels, and creation of an internal environment which will reduce post-transaction costs (ex post costs). However, in the context of e-commerce, considering any given exchange in isolation from other exchanges that may complement or facilitate that exchange makes it difficult to assess the value created by a specific economic exchange (Amit and Zott 2001: p. 500).