Organizational Forms in the Electronic Age

Abstract

There are a lot of discussions in the academic and popular press about the types of organizational forms that have evolved (or are going to emerge) in the Electronic Age. This paper expands the fundamental framework offered by Transaction Cost Theory to understand the impact of emerging information and communication technologies on organizational forms. According to the theory, there are three dominant modes of governance, namely, market, hierarchy, and clan, each suitable for different contexts. In this paper, it is argued that the Internet has increased the efficiency of market-based transactions, thereby increasing the scope of market governance. It has also lead to the emergence of virtual (or boundary-less) organizations based on a new mode of governance, which is labeled self-governance, as a viable mode in certain contexts, that are even less structured than those conducive for clan governance. Extranets have enhanced the scope of network organizations by providing a more viable mode of governance, labeled network governance, which can be positioned between market and hierarchy. Finally, intranets have improved the efficiency of hierarchies thus expanding its applicability. But they have also made clan governance more feasible. In summary, the emerging information and communication technologies have led to the emergence of new modes of governance, enhanced the opportunity to govern a greater range of exchanges than was possible without them, and altered the conditions under which the alternate modes of governance are suitable.