Online Content Syndication - A Critical Analysis From The Perspective Of Transaction Cost Theory

Substantial economies of scale in the production of information goods give reasons for considering the outsourcing of the production. The trade in information goods – resulting from the outsourcing of the production – is a typical transaction which can be analysed using transaction cost theory. Taking into account the particular characteristics of information goods and the process of delivering them through digital networks, three out of five sources of transaction costs can be identified which are most relevant for the outsourcing decision. In designing the transaction process, these sources (bounded rationality, opportunism and uncertainty) can be influenced by the transaction partners in order to reduce market-based transaction costs. Employing an intermediary can further reduce transaction costs resulting from bounded rationality and uncertainty but can (overall) also give rise to opportunism. We find that opportunism is the most relevant source of transaction costs if an intermediary is employed on the market for information goods.