Transaction Cost Economics in the Digital Economy: A Research Agenda

Frank Nagle, Robert Seamans, and Steve Tadelis in this paper:

Transaction Cost Economics (TCE) theory has played an important role in understanding when it is more efficient for a transaction between two parties to occur within the market or within an organization. However, as more transactions occur in a digitally-mediated fashion, open questions remain as to how TCE applies in the digital economy.

In this article, we consider how digital transformation helps us probe the boundary conditions of TCE and how, despite all the changes wrought by digital transformation, TCE can still provide a useful lens to help scholars and practitioners understand the organization of economic activity in the market-based economic system.

We highlight three characteristics of digitally-mediated transactions: reputation mechanisms, private information, and non-pecuniary transactions and then discuss how these characteristics offer opportunities for future research and lay out a research agenda for this increasingly important area.

 

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