Research On The Effect Of Internet On Firm Boundaries

In the recent twenty years, the application of the Internet has brought great changes tosociety, influenced people’s lifestyles and firm operation. In the Internet era, virtualorganizations, strategic alliances, corporate networks and other forms of organization emerge,firm boundaries also have changed a lot and showed dynamic, blurring and multiple borderdifferentiation characteristics, enterprises need to reasonably adjust its development strategyand boundaries to adapt the changing environment. But most Chinese enterprises are at theend of the global industrial chain division, it is difficult for them to adapt to the changingenvironment and end in failure. The definitude of firm boundaries is the premise of strategiesdevelopment and the important basis of core competitiveness. Therefore, the study of theimpact of the internet on firm boundaries not only helps us to deepen the understanding of thenature of firm, but also can provide the basis for enterprise to make their strategies, withfulling of theoretical and practical significance.Enterprise is a multidimensional entity of contract, ability, organization and otherproperties. The existing research on this problem are mainly from a single perspective. So thispaper attempts to analyze the impact of the Internet on multiple firm boundaries from thethree perspective of multiple borders. Firstly, based on transaction cost theory and LSmodel(Lewis&Sappinton,1991), this paper analyze the change of firm cost boundaries.Since the analysis of transaction cost theory does not consider the impact of its own internalresources, knowledge and ability differences to the firm, therefore, this paper analyze theimpact of the Internet on the firm ability boundaries based on enterprise resources, corecompetencies and knowledge dimensions; Finally, this paper analyze the impact of theInternet on the firm boundaries based on organizational theory by using several examples ineach chapter.This paper has got three conclusions:(1) Firm cost boundary may be expanded orshrinked under the condition of Internet, which depends on the change degrees of internal andexternal transaction costs and production costs;(2) Internet technology is not only conduciveto enterprise resources, accumulation and innovation capability and core elements ofcorporate knowledge, but also conducive to promoting the growth of enterprise capabilitiesand expanding firm boundaries;(3) Organizational boundaries are divided into verticalboundary and horizontal boundary. The vertical boundary shrinks and the horizontal boundarybecome fuzzy under the condition of the Internet. According to the conclusions, this paper provide some advice for Chinese firms to adjustdevelopment strategies from the perspective of boundaries under the Internet environment:(1)Chinese firms should change their development ideas, reconstruction of external scaleboundary, and change themselves to the new economic organizations;(2) Focus on corporatecapacity building, strengthen resource acquisition, knowledge innovation and corecompetencies cultivation to expand capacity boundary, finally form core competence;(3)Construction of flat organizational structure and break barriers of the organization department,reconstruction of the firm organizational boundaries, enhance the organization’s ability toadapt the external dynamic environment.