Measuring the Influence of Information Networks on Transaction Costs Using a Non-parametric Regression Technique

All business transactions as well as achieving innovations take up resources, subsumed under theconcept of transaction costs (TAC). One of the major factors in TAC theory is information. Informationnetworks can catalyse the interpersonal information exchange and hence, increase the access to nonpublicinformation. Our analysis shows that information networks have an impact on the level of TAC.Many resources that are sacrificed for TAC are inputs that also enter the technical production process.As most production data do not separate between these two usages of inputs, high transaction costs areunveiled by reduced productivity. A cross-validated local linear non-parametric regression shows thatgood information networks increase the productivity of farms. A bootstrapping procedure confirmsthat this result is statistically significant.