Analysis of e-commerce model in Transaction Cost Economics framework

Abstract

This paper introduces the theory and method of Transaction Cost Economics to identify the essence of e-commerce model by explicating its core objective and function. From the correspondence of transactions and governance structures, the author also discusses the design principle of an ecommerce model. The analysis shows that so-called e-commerce model in commercial practice could be identified as non-market governance structure in TCE framework. Also, under the high uncertainty of Internet, to minimize transaction costs, various e-commerce transaction distinguished by different assets specificity and transaction frequency should mutually correspond with governance structures having different expense and function. The analysis attempts to unify the existing definitions and classifications about e-commerce model in a multi-discipline framework, and bring people some new clues for the innovation in e-commerce application. At the same time, this heuristic perspective waits for the comprehensive examinations by further empirical researches.