The internet: competitive strategy and boundaries of the firm

Many advantages have been ascribed to the internet. Although it lacks the necessary characteristics to be regarded as a strategic resource, the internet seems to be a useful tool to provide support for competitive strategies. In this study, we discuss how the internet can be used to support the development of capabilities and redefine firm boundaries. Using a sample of Spanish manufacturing firms, we find positive relationships between the use of the internet and product differentiation based on innovation as well as the introduction of organisational changes. In addition, we present evidence that the internet modifies firm boundaries as a result of the positive relationships found between the use of the internet and the degree of vertical integration, as well as the establishment of technological agreements.