The Transaction Costs of eProcurement

Abstract

1 lntroduction Electronic procurement (eProcurement) has tumed out to be a much noticed alternative to traditional procurement strategies taking into account that the implementation of specific information and communication technologies is of essential importance for this strategy type. Undoubtedly, eProcurement can often help to establish a fast and economic procurement process after the available technology has efficiently been implemented and additional measures of reorganization have taken place. lt is the aim of this contribution to extend the evaluation of eProcurement beyond the narrow frontiers of the theory of the firm, though. There exist two simple reasons for such a broadening of the decision fundaments. First of all, the real behavior of decision agents is not only based on production costs and, thus, there sometimes seems to be a contradiction between the eProcure-ment decisions which are derived from a comparison of the production costs and the firm's behavior in reality. Second, the production theoretic view does not reflect enough on the strategic consequences of a procurement decision. In order to thoroughly characterize the corresponding procurement problem, the results of institutional economics, especially the transaction cost theory, can be adopted, interpreted and further developed. Consequently , the transaction costs of eProcurement have to be determined. Adding production and transaction costs of procurement activities will allow for far more reliable conclusions regarding the procurement strategy and a detailed construction of the eProcurement instruments which have to be installed in a single firm due to its particular characteristics.