Impacts of E-Commerce on Firm and Industry Organization

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The rapid growth of e-commerce on the Internet has raised a question of whether the Internet will mainly facilitate market consolidation by large companies, or whether it will be a driver of growth for small and medium-sized enterprises (SMEs) as well. This is significant because e-commerce could lead to increased competition, greater consumer choice and more innovation, or it could lead to reduced competition, consumer choice and innovation, depending on the impacts of e-commerce on firm and industry organization. The early evidence on the question is mixed and largely anecdotal. Therefore, the objective of this research to provide scientific evidence on the question. It uses theory on firm and industry organization as the conceptual basis for hypothesizing that e-commerce will lead to greater use of market transactions, as opposed to internal hierarchies, to organize economic activities, leading to increased competition and new business opportunities. This project examines the hypothesis through systematic, detailed case studies of the extended value chains of four firms in the PC industry. The computer industry is chosen because it is the leading user of e-commerce and it includes manufacturing, service, and information sectors, thus providing a microcosm of the national economy. The results will not only contribute new knowledge, but also provide a scientific basis for public discussion about the social and economic impacts of e-commerce, and lead to a more extended empirical study.