Information technology is vital for a modern firm’s optimal performance today, as it increases the firm’s capability to coordinate business transactions within the firm, but also among firms such as between buyers and suppliers. There are four effects of information technology that reduced transaction and coordination costs (WIGAND 1997):
(i) the communication effect, the advances in information technology allow more information to be communicated in the same unit of time, thus reduce transaction costs,
(ii) the electronic integration effect, which has a close relationship with electronic linkage between buyer and seller,
(iii) the electronic brokerage effect, an electronic marketplace where buyers and sellers come together to compare offerings, and
(iv) the electronic strategic networking effect, the information technology enables the design and deliberate strategic deployment of linkages and networks among cooperating firms intended to achieve joint, strategic goals to gain competitive advantage.
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