Organizational Boundaries and Theories of Organization

Abstract

Organizational boundaries are a central phenomenon, yet despite their significance, research is dominated by transaction cost economics and related exchange-efficiency perspectives. While useful, it is time to engage in a broader view. Our purpose is to provide a deeper understanding of organizational boundaries. First, we develop four boundary conceptions (efficiency, power, competence, and identity) and their distinctive features including organizational and environmental assumptions, unique conception of boundaries, theoretical arguments, empirical validity, contributions, and limitations. Efficiency takes a legal-ownership view of atomistic boundary decisions. In contrast, the power conception emphasizes the sphere of influence of the organization, while competence focuses on the resource portfolio and its related configuration, and identity centers on the often unconscious mind-set by which organizational members understand “who we are.” We also indicate relationships, both coevolutionary and synergistic, among the conceptions. Second, we juxtapose these conceptions with the current literature to create a springboard for a renewed research agenda. This agenda includes greater focus on nonefficiency perspectives, relationships (not competition) among boundary conceptions, studies that take the normative implication of theories more seriously, and problem-driven research on contemporary boundary issues such as contract employment and business ecosystems.