To evaluate how advancements in information technology and declining coordination costs alter the balance between market-based and hierarchical governance of economic activity.
Conceptual economic analysis applying transaction and coordination cost frameworks to organizational structures.
Comparative assessment of market mechanisms versus internal corporate hierarchies under the influence of information technology.
Information technology substantially reduces overall coordination costs across economic transactions.
Lower coordination costs systematically favor the adoption of electronic markets over internal corporate hierarchies for organizing economic activity.
Abstract
By reducing the costs of coordination, information technology will lead to an overall shift toward proportionately more use of markets—rather than hierarchies—to coordinate economic activity.