《4 Business-to-business e-commerce Value creation》.pdf

BUSINESS-TO-BUSINESS E-COMMERCE: VALUE CREATION, VALUE CAPTURE AND VALUATION . Kaplan Luis Garicano and Steven N ABSTRACT This paper presents a framework to analyze the potential changes in transaction costs due to the introduction of e-commerce on transactions between businesses . It then illustrates and applies this framework using internal data from an Internet-based firm to measure process improve- ments, marketplace benefits, and motivation costs . We find that process improvements and marketplace benefits are potentially large, while little evidence exists of increases in motivation costs. Finally, we use the framework to help discuss why valuations of Internet companies were so high at the end of 1999 and why they have declined so precipitously since then. 1. INTRODUCTION In this paper, we study the economic impact resulting from the introduction of the Internet in transactions between firms (i.e . business-to-business (B2B) The Economics of the Internet and E-Commerce, Volume 11, pages 89-125. ©2002 Published by Elsevier Science Ltd. ISBN: 0-7623-0971-7 89 90 LUIS GARICANO AND STEVEN N. KAPLAN e-commerce). We present a framework that describes the potential changes in transaction costs caused by transferring a transaction from a physical marketplace to an Internet-based one . Following Milgrom and Roberts (1992), our framework differentiates between coordination costs and motivation costs . We argue that it is likely that B2B e-commerce reduces coordination costs and increases efficiency. We illustrate and apply this framework using detailed internal data from one Internet-based firm to measure process improvements, marketplace benefits, and motivation costs . Our results suggest that process improvements and marketplace bene