Electronic information systems and organizational boundaries

This paper models the effects of increasing utilization of information technology on organizational boundaries. The effects of information systems on structure are analysed by integrating the transaction cost and knowledge-based views of the firm. A model of structural choice is developed from the combination of these viewpoints. From this model, we can develop propositions regarding the relation between information technology and changes in organizational structure. The model suggests that the effect of increasing utilization of information technology is to drive firms through a repeated three-stage lifecycle that alternately drives firms toward market and hierarchical structures, resulting in heterogeneous network boundaries.