Contact: Dr. Franz T. Lohrke, Associate Professor of Management, 205-726-2373, ftlohrke@samford.edu

When should small businesses consider moving online?

The Internet has provided small businesses with the ability to compete against much larger companies by expanding their geographic reach and reducing communication costs with customers. Despite these and other benefits, some small businesses have adopted a "wait and see" posture toward Internet use.

Recent research conducted by Samford business professors Franz Lohrke and Cynthia Frownfelter-Lohrke examined factors prompting these businesses to employ the Internet to a greater or lesser extent. Small businesses traditionally have lacked resources to bring some business functions, such as customer support, in-house, but the Internet has dramatically reduced the costs of doing so. Employing transaction cost economics, which examines a firm's costs of locating and negotiating potential partner firms as well as monitoring and enforcing contracts with these firms, Professors Lohrke and Frownfelter-Lohrke tested whether small firms that faced higher "transaction costs" were more likely to move online.

Their results based on a survey of 42 US small businesses generally supported this relationship. Overall, these findings highlight the important benefit that Internet use can provide small businesses. The findings were recently published in the International Small Business Journal.