Structuring the Boundaries of the Firm

Abstract

The boundaries of the firm have been part of economic analysis since Ronald Coase’s seminal paper on the nature of the firm. Subsequently numerous theories and explanations of the boundaries have evolved. New information and communication technology are now changing these boundaries which become increasingly blurred. Boundaries have turned to be “bounding areas” and companies interact in multiple ways. Knowledge about where these bounding areas are and how to design them has become highly relevant for companies’ success. The article shows what determines the boundary areas and how they can be organized by applying existing theories of the firm like to this problem. These theories provide guidelines for the design and the management of the boundaries of the firm.