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Lessons from Alibaba.com: government's role in electronic contracting

Lessons from Alibaba.com: government's role in electronic contracting Although electronic commerce (e‐commerce) can be a source of competitive advantage, will e‐commerce businesses in countries like China flourish when governments still take a “wait‐and‐see attitude” as to prompting, protecting, and regulating e‐commerce? The paper employs transaction cost economics in analyzing the role of government in regulating electronic contracting. Due to the transaction costs arising from e‐commerce, explicit contracts between parties are usually incomplete. The paper argues that these contracts should always be backed by implicit contracts, which are determined by default rules in various governments. Therefore, it behoves governments urgently to fill gaps in incomplete contracts in e‐commerce in order to foster a predictable legal environment for e‐businesses, minimize legal risks and transaction costs, and maximize economic and social benefits. The authors believe that governments must also act in concert with one another at the international level to create a favorable and consistent commercial environment. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png info Emerald Publishing

Lessons from Alibaba.com: government's role in electronic contracting

Qin Hu; Xun Wu; Clement K. Wang
info , Volume 6 (5): 10 – Oct 1, 2004
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Publisher
Emerald Publishing
Copyright
Copyright © 2004 Emerald Group Publishing Limited. All rights reserved.
ISSN
1463-6697
DOI
10.1108/14636690410564807
Publisher site
See Article on Publisher Site

Abstract

Although electronic commerce (e‐commerce) can be a source of competitive advantage, will e‐commerce businesses in countries like China flourish when governments still take a “wait‐and‐see attitude” as to prompting, protecting, and regulating e‐commerce? The paper employs transaction cost economics in analyzing the role of government in regulating electronic contracting. Due to the transaction costs arising from e‐commerce, explicit contracts between parties are usually incomplete. The paper argues that these contracts should always be backed by implicit contracts, which are determined by default rules in various governments. Therefore, it behoves governments urgently to fill gaps in incomplete contracts in e‐commerce in order to foster a predictable legal environment for e‐businesses, minimize legal risks and transaction costs, and maximize economic and social benefits. The authors believe that governments must also act in concert with one another at the international level to create a favorable and consistent commercial environment.

Journal

info – Emerald Publishing

Published: Oct 1, 2004

Keywords: China; Electronic commerce; Contracts; Legal systems; Transaction costs

References

  • Filling gaps in incomplete contracts: an economic theory of default rules
    Ayres, I.; Gertner, R.
  • A new legal framework for electronic commerce: the EU electronic commerce proposal
    Baecelo, J.R.
  • Property rights, liability rules and inalienability: one view of the cathedral
    Calabresi, G.; Melamed, D.