Factors Determining e-Trade Performance Based on Transaction Cost Theory: The Case of South Korea

Countries worldwide have been actively investing in building up global e-trade infrastructure for international transactions such as those of goods, services, and money. Such investments have facilitated business firms’ making greater use of e-trade systems and improving their management performance. The objective of this paper is to review the mechanics of how e-trade practices can affect a firm’s performance. It is well known that the introduction of e-trade systems can decrease transaction costs at the macro level, because in many cases, data sets are compiled from a collection of individual transactions. However, this review attempts to determine whether trade transaction costs influence exporting firms’ performance at the firm level. A theoretical framework is suggested for determining the usage and performance of global e-trade. An empirical analysis of South Korean exporting firms has been undertaken. This paper concludes that e-trade has yet to overcome the barriers resulting from transaction costs, and that it is therefore very important to increase both organizational information and global capabilities. In this regard, appropriate actions such as intensive education and training programs should be implemented in order to make South Korea s e-trade mature.