Interaction of Technological and Institutional Change in the Development of an Electronic Commerce System in China's Pharmaceutical Distribution Chain - A Transaction Cost Perspective

In this paper, we describe the introduction of electronic commerce into the drug distribution industry in China. This case is especially interesting because massive institutional changes coincide with the introduction of a new technology. For these reasons, it becomes possible to study the interaction of technological and institutional change in real time and in their real-life context. We use two alternative transaction costtheoretic perspectives on the interaction between institutional and technological change as our theoretical framework. The case study suggests that the rationale which motivates introduction of a new technology in the context of institutional change may be different from the rationale which underlies the practices which develop on the basis on the newly introduced systems and institutions.