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Journal Article

Dynamic Boundaries of the Firm: Are Firms Better off Being Vertically Integrated in the Face of a Technological Change?

Allan Afuah
The Academy of Management Journal
Vol. 44, No. 6 (Dec., 2001), pp. 1211-1228
Published by: Academy of Management
Stable URL: http://www.jstor.org/stable/3069397
Page Count: 18
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
Dynamic Boundaries of the Firm: Are Firms Better off Being Vertically Integrated in the Face of a Technological Change?
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Abstract

Building on transaction cost economics and the knowledge-based theory of the firm, I argue that, following a technological change that is competence-destroying to firms and their suppliers, firms that are integrated vertically into the new technology will perform better than those that are not. At the same time, firms that had been vertically integrated into the old technology will perform worse than those that had not been. This argument suggests that the efficient boundaries of a firm are dynamic. I used the adoption of reduced instruction set computer (RISC) technology by makers of computer workstations to explore the hypotheses.

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