Vertical Integration and the Relationship Between Publisher and Creators

The authors analyze the creator-publisher relationship in the book and software industries, which can benefit from digital distribution. This can be called pure electronic commerce, which refers to a transaction that uses information systems to avoid physical exchange and occurs entirely in a digital form. Using coordination and transaction cost theories as a theoretical framework, the authors posit that in spite of cost reductions in these areas vertical integration remains important in these two industries. The authors analyze the industries in the areas of compatibility standards, complexity of product development, after-sales support, intellectual property, development funding and marketing risks, and brand. The analysis of these factors shows why software tends to be more vertically integrated than books. They find that even with technological advances, the role of the publisher remains valuable. Reduction of transaction and coordination costs are two of many factors affecting the transition towards digital distribution of software and books.