n among economic activities that are not jointly owned: economies of scope and scale enable transaction costs to be reduced. Transaction costs consists of coordination costs and transaction risks. Coordination costs are the costs of coordinating decisions and operations among economic activities, in order to improve resource efficiency. This includes costs to establish and operate information channels and decision processes. Transaction risk is the possibility of opportunistic behaviour by a party to the relationship leading to uncertainty surrounding the level and division of the benefits from the increased integration of decisions and operations. Transaction risk can be divided into three sub-categories: transaction-specific capital; information asymmetries; and loss of resource control. Traditional transaction-cost theory assumes that increasing explicit coordination requires specialised sunk investments to decrease coordination costs, but that the sunk nature of these investments substantially increases transaction risk. The application of IT tends to reduce the coordination costs by reducing the costs of accumulating, storing, and communicating information. It is necessary, however, to to mitigate transaction risk as well, e.g. through modularity and replicability of knowledge, open standards, intuitive user interfaces, and interconnection among networks. However, codified information is much easier to duplicate and transfer without any security measures. IT-facilitated cooperation among enterprises generally takes one of the following forms: vertical quasi-integration, whereby existing relationships with customers and suppliers can become more tightly coupled; outsourcing, whereby activities previously performed within one enterprise due to high transaction risk may be shifted to third-party providers, in order to benefit from the higher production economics, such as scale and specialisation, of those providers; and quasi-diversif...
