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Abstract

More than two decades after the introduction of the electronic market hypothesis (EMH), electronic markets have evolved from opaque to transparent, from biased to unbiased, and finally to personalized; yet, airline ticket distribution keeps searching for the right balance between markets and hierarchies. With advances in IT (Information Technology), it is not clear whether market-based or hierarchical forms of ticket distribution can achieve the optimal distribution efficiency. 17 years of operational data was analyzed by using data envelopment analysis (DEA) and Tobit regression to explore the relationship between firm performance and forces causing the transformation of electronic markets in the airline ticket distribution industry. The end results reveal that, despite the apparent inverse relationship between IT-driven distribution and production within hierarchies, airline business decisions, such as disintermediation to exclude downstream players or vertical integration to compete with rivals, created negative impacts on their performance and did not improve operational efficiency.

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Firm Boundary and Performance in the Airline Ticket Distribution Industry: Effects of the Evolution of Electronic Markets

More than two decades after the introduction of the electronic market hypothesis (EMH), electronic markets have evolved from opaque to transparent, from biased to unbiased, and finally to personalized; yet, airline ticket distribution keeps searching for the right balance between markets and hierarchies. With advances in IT (Information Technology), it is not clear whether market-based or hierarchical forms of ticket distribution can achieve the optimal distribution efficiency. 17 years of operational data was analyzed by using data envelopment analysis (DEA) and Tobit regression to explore the relationship between firm performance and forces causing the transformation of electronic markets in the airline ticket distribution industry. The end results reveal that, despite the apparent inverse relationship between IT-driven distribution and production within hierarchies, airline business decisions, such as disintermediation to exclude downstream players or vertical integration to compete with rivals, created negative impacts on their performance and did not improve operational efficiency.