Analyzing the Impact of IT on Firm Vertical Boundaries

This article studies the impact of information technology (IT) to firm vertical border from the perspective of transaction cost economics. By dividing information technology into the IT environment outside the firm and IT investment within firm, through in-depth analysis of the mechanism of IT, this article announces that, firm who make IT investment will make the reduction of its internal coordination costs mainly; and as the developing of IT environment, firm external coordination costs will mainly reduce. Thus, firm's IT investment and its IT environment have contrary influence on firm vertical boundaries.