The Internet as an Information Conduit

Small- and medium-sized enterprises (SMEs) can use the internet to establish direct customer contact, thereby reducing reliance on channel intermediaries for customer support. Based on transaction cost analysis, this study examined whether SMEs facing high asset specificity in product information transmitted to and received from customers employed the internet to a greater degree than those facing lower information specificity. Results based on a survey of 42 US SMEs generally supported this relationship. Moreover, results were generally stronger for firm- than industry-level factors impacting information specificity. Overall, these findings highlight the important benefit that internet use can provide in reducing an SME's transaction costs.