The fading boundaries of the firm: The role of information and communication technology

Traditionally, hierarchical mechanisms have been implemented within firms and market mechanisms between firms. Empirical evidence suggests that this simple assignment of mechanisms to organizational forms is no longer valid; market mechanisms are increasingly used within firms whereas hierarchical links are often extended to inter-firm relations (organizational disintegration). Simultaneously, an increase in the geographical distances over which hierarchical as well as market relations are established can be observed (physical disintegration). This disintegration of firms is triggered and supported by new information and communication technologies. These technologies enable the implementation of new organizational forms which allow for more efficient coordination and incentive structures and which lead to the fading of traditional boundaries of the firm.