The effect of transaction costs on the decision to replace 'off-the-shelf'software: the role of software diffusion and infusion

This study examines the extent to which software diffusion and infusion aff ect the decision to replace 'off-the-shelf' software, using the example of spreadsheet software. Transaction cost economics motivates the propositions that higher levels of software diffusion and higher levels of software inf usion act as disincentives on the firm's decision to upgrade or change off- the-shelf software. Our focus on software diffusion and infusion extends pr evious research that only examined hardware infusion and diffusion. Results from the study using a survey news-groups and interviews, generally suppor t the propositions and show that the more software is diffused and infused into a firm, the less likely it is to be changed or upgraded. More specific ally the results also show that while software infusion acts directly to re duce the likelihood of software replacement, software diffusion only affect s it indirectly through ifs effect on infusion.