Electronic Markets and Electronic Hierarchies : Effects of Information Technology on Market Structures and Corporate Strategies

This paper analyzes the fundamental changes in market structures that may result from the increasing use of information technology. First, an analytic framework is presented and its usefulness is demonstrated in explaining several major historical changes in American business structures. Then, the framework is used to help explain how electronic markets and electronic hierarchies will allow closer integration of adjacent steps in the value added chains of our economy. The most surprising prediction is that information technology will lead to an overall shift toward proportionately more coordination by markets rather than by internal decisions within firms. Finally, several examples of companies where these changes are already occurring are used to illustrate the likely paths by which new market structures will evolve and the ways in which individual companies can take advantage of these changes. ___1 _^ 1 ___ 1 _1 1 _