Analyzing the mechanism of economic efficiency of electronic commerce

Electronic commerce(EC) has been growing rapidly and is becoming a necessity of future business development, which has positive impact on improving the economic efficiency. Based on the early research about "the Productivity Paradox " of information technology and the economic efficiency theory, this paper aims at defining the notion of EC's economic efficiency and analyzing the mechanism of EC's economic efficiency. We find that EC improves the economic efficiency through decreasing transaction cost and realizing its network effect. EC's economic efficiency is decided by the EC efficiency of within firm, the EC efficiency of among firms the efficiency of digital market and the efficiency of government supervising EC. At the same time, there are demanded on institutional innovations of firm, market, industry and government.