Online distribution of packaged software

Abstract

Increased bandwidth and user sophistication make it practical for software developers to sell and distribute packaged software to customers online. This paper develops a transaction cost model of the conditions under which software developers are more likely to distribute their packaged software online rather than through traditional channels. The model is tested using data from a survey of Canadian software firms. Almost three-quarters of the respondents use the Internet at least in part to distribute their products. Firms are more likely to distribute their packaged software online in less diverse markets and where channel volume is increasing rapidly. However, the results are not consistent with other conditions posited to be associated with online distribution. Implications for understanding how the Internet is changing the transaction costs of distributing digital products are discussed. © 2011 Springer-Verlag.