Firm Transformation: Transition to a “Cloud” System of Value Creation and Value Capture

Abstract:

This paper is dedicated to two trends of the evolution of firm. The first trend is its disintegration which represents externalization of assets, functions, and competencies. The second trend is its expansion which leads to the extension of firm’s influence beyond its legal boundaries to the inclusion of other agents into its economic system. This is why a modern economic entity can be considered a cloud of partners organized around the central agent and affiliated with it by hybrid links (according to Williamson). This cloud can be described as a metafirm. It is demonstrated that an economic agent weakens its ties with cost sources but strengthens its ties with sources of income (customers) by actively using new technological tools. It leads to the inclusion of customers into the cloud of partners. Customers also form hybrid ties with the economic agent. However, the fact of this inclusion is hidden from customers, so the hybrid they form along with the economic agent is an implicit one. This transformation of firms helps them reduce costs and risks and increase their efficiency. Economic agents establish an integrated system of creation and capture of value. Nevertheless, this model of economic agents’ performance creates risks for customers. New measures should be taken in order to protect customers’ interests.

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