Antecedents of a Transaction Cost Theory of Vertical IS Standardization Processes

The analysis of standardization processes is dominated by the concept of positive network externalities. This paper develops an alternative view on standardization processes which is based on transaction costs rather than positive network externalities. We call this view the institutional view and distinguish it from the physical view that is associated with the concept of positive network externalities. We develop a transaction cost-theoretic model of standardization processes in the context of the development of vertical IS standards and discuss its merits and limitations. We also use some findings regarding the development of EDI-based interorganizational information systems to motivate our efforts.