The nature of the firm has changed since COASE (1937) and the birth of the theory of the firm. An important change is the advent of modern information and communication technology (ICT) that altered the business environment. The objective of the dissertation is to study the transformation of corporate organization by analyzing the impact of a changing information and communication environment on firm boundaries. Therefore I study firm boundaries in the manufacturing and the media sector. These two sectors are selected to illustrate important differences in the change of firm boundaries. Although both showed an impact of ICT, the direction of this change has been different because of contrary product characteristics. The reason is that ICT in the manufacturing sector mainly leads to communication and coordination improvements, while it induces problems to protect intellectual property rights (IPRs) in the media sector.
In the first part the manufacturing sector is analyzed. Hypotheses regarding the impact of ICT on the governance of business activity are developed based on arguments from Transaction Cost Economics (TCE). I subsequently check these hypotheses against manufacturing industry data in a panel regression design. It is explored to what extent the international dissemination of ICT acted as a catalyst in changing organizational structures. Therefore I compare the degree of vertical integration of manufacturing firms in different countries over time and analyze the role of ICT in this context. The analysis is controlled for alternative determinants of firm boundaries including the institutional, economic and political environment. Vertical disintegration, i.e. slimmer firms, can be found particularly in business environments with high ICT penetration. This can be regarded as tentative evidence for ICT-triggered outsourcing.
The second part focuses on firm boundary changes in the media sector. Media firm boundaries appear to move in the opposite direction: recent increases in vertical integration by major media firms are analyzed regarding the impact of ICT. Using an eclectic theory synopsis, IPRs are identified as an important variable in the relationship between ICT and media firm boundaries. Hence, the impact of ICT on media firm boundaries is studied indirectly by looking at the connection between ICT and IPRs: I test the effect of ICT penetration on recorded music sales figures in a panel regression. The tests show a significant negative impact of ICT on music sales what can be interpreted as a loss of IPRs via ICT-enabled music piracy. Music firms loose sales in business environments with enhanced technological copying capabilities. I conjecture that vertical integration increases are a response of media firms to regain and maintain control over the production and distribution of their products. In addition, the effect of IPR protection is taken into account. Recent regulatory action in form of international treaties initiated by the World Intellectual Property Organization (WIPO) seems to contribute to contain IPR loss.
In my empirical analyses I find evidence that supports the view that the ICT shock has an ambivalent impact on firm boundaries. The comparison of the manufacturing and the media sector shows that distinct product characteristics like intangibility determine the direction of the ICT-induced shift in firm boundaries. ICT plays a role in the fragmentation of value-chains in the manufacturing sector but can provide vertical integration incentives in the media sector.
