Automating Coordination Mechanisms-Markets, Hierarchies, and Associations

This paper revisits the move to the market hypothesis proposed by Malone et al. (1987) andargues that, although compatible with empirical results, the theoretical basis of this hypothesisis flawed since no clear distinction is made between coordination mechanisms and forms ofgovernance. Based on this distinction, a theoretical framework is developed which has twomain advantages compared to other modes of explanation: (1) it can easily deal with a numberof theoretical inconsistencies created by existing modes of explaining IT´s impact on theorganization of economic activity; (2) it allows for deriving a number of hypotheses which, ifnot rejected by empirical tests, allow for a greater degree of confidence in the nature of thecausal relationship between IT and the organization of economic activity. The paper proceedsby first developing a set of hypotheses concerning IT´s impact on coordination mechanismsand, building upon this analysis, developing a second set of hypotheses concerning IT´s impacton governance forms. As a novelty, these hypotheses predict the increasing importance ofassociative forms of governance as IT is used to automate coordination mechanisms.Implications of these hypotheses from a management and a regulatory point of view aretentatively discussed.