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Abstract

Building on the resource-based view, this study compares the financial performance of three different types of firms: click-and-brick (CB), traditional brick-and-mortar (BM), and pure-click (PC) firms. We select twenty-one firms from each type and examine their financial performance using profitability and cost ratio analysis for the period from 2000 to 2004. The results of our ratio analysis indicate that the average profitability and cost structure vary by firm type. Firms that conduct their business using both traditional-physical stores and the Internet achieve significantly higher profitability than comparable firms that either use only traditional-physical stores or solely rely on the Internet. Furthermore, the cost structures of the firms that conduct their business using both traditional-physical stores and the Internet appear to be comparable to the traditional firms. In contrast, the pure-click companies that rely solely on the Internet for doing business seem to experience higher overall costs. These results are of practical relevance for the managers in the pure-click firms who may face less favorable cost structures as compared to other firm types.

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