ITM 100 Lecture Notes - Transaction Cost, Agency Cost, Competitive Advantage

• School: Ryerson University
• Department: Information Technology Management
• Course: ITM 100
• Professor: Ron Babin

Document Summary

3. 2 how information systems impact organizations and business firms. Information systems have fundamentally changed the economics of organizations, becoming interactive tools deeply involved in the minute-to-minute operations and decision making of large organization. Economics it changes the relative costs of capital and of information. Info systems viewed as factor of production that can be substituted for traditional capital and labour. Results in decline of middle managers and clerical workers. It cost decrease results in its substitution for other forms of capital; buildings, machinery. Helps firms contract in size because it decreases transaction costs --- costs incurred when a firm buys on the marketplace what it cannot make itself. Transaction cost theory firms and industries seek to economize on transaction cost as they do with production costs fig 3-6. Using markets are expensive, costs like locating and communicating with suppliers, monitoring contract compliance, buying insurance, obtaining information etc. Firms have tried to use vertical integration to expand.