The Impact Of Information Technology On Firm’s Vertical Boundaries

The application of information technology is an important factor affecting enterprises’vertical boundaries. Since the 21st century, the influence factors of firms’ vertical boundaries are more complicated by the application of digital technology and the acceleration of the process of globalization. The development of information technology has changed both internal and external environment on the production and operation vertical chains of the firm. The spread of the Internet improves the the production efficiency of the enterprise and reduces the level of information asymmetry in the market, which is affecting the changes of the firms’vertical boundaries.This paper reviewed the theoretical background of the research on firms’vertical boundaries from the perspective of traditional economics, transaction costs theory and enterprise competence theory. And then summarized the literature reviews on those relevant domestic and foreign papers. The influence of information technology development on the enterprises’vertical boundaries is more obvious than before. But the domestic research literature on this topic is still minority. Their research results indicated that the influence of information technology on enterprises’vertical boundaries have two different kinds of results. Both internal coordination and organization costs and external market transaction costs were reduced by information technology.According to the analysis of the mechanism of the impact of IT on firms’vertical boundaries, this paper has used the panel data between 2008 and 2014 of listed companies on IT industry for empirical research. We selected the hardware and software investment of the listing corporations to measure the application of information technology as explanatory variable.We found that information technology investment situation in our country was fluctuating rising. Despite of the declining of the vertical integration degree of enterprises before 2010, it showed an upward trend in the overall research. Based on the random effects analysis of panel data, we concluded that the application of information technology can promote the expansion of enterprises’vertical boundaries. The increase of information technology investment is more significant to reduce the internal organization and coordination cost than the external transaction costs. And puts forward some relevant recommendations after the analysis and summarize.