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Virtual Enterprises

Somewhere between conceptions of the firm as proprietary, hierarchical production mechanism and the firm as distributed, commons- and peer-based institution lies an emerging class of virtual firms that mix and match sensibilities: some peer-based, some hierarchical; some commons-based, some proprietary.  My hunch is that these sorts of organisms are going to be the most interesting “class” of firms to watch over the next few years, as technology and related systems allow enterprises to fulfill the promise of a de-materialized market.  Coase taught us to look for transactions and information costs.  What happens when those decline to nearly zero?  What else should we look for?

Those modest thoughts today are prompted by recent encounters in Pittsburgh with local residents affiliated with two very different but equally virtual professional services firms.  One is CivicActions, which “provides strategic Internet consulting, technology planning, visual and information design, web content creative and management, constituent relationship management, e-advocacy, e-canvass and online fundraising tools.  Our services empower distributed networks to protect the environment, advance peace, improve public health, promote education, champion social and economic justice and increase human potential.” And they do it online, and with open code.  The second is GTC Law Group, a law firm specializing in IP and M&A services that has a couple of physical offices but exists largely as a virtual organization.

Both of these firms have been around for a few years (CivicActions since 2004; GTC since 2002), so in a sense my sense of novelty stems only from the fact that both firms have just recently acquired a presence in Pittsburgh, via someone who lives here or who moved here. 

But the very Pittsburgh-ordinariness of the development is what intrigues me.  Pittsburgh has its cutting edge moments, to be sure, but it is not a cutting edge town when it comes to business organization and strategy.  Historically, the Pittsburgh Steelers were a leading metaphor for all of Pittsburgh culture:  Run the ball first.

Even the Steelers are passing more these days, however.  Think regulation (licensing? telecomm?  antitrust and unfair competition? choice of law?), think business strategy (go deep or broad? move fast or slow?), think economic development (where do growth strategists place their bets?).  How does this change how we think about law and policy?

1 thought on “Virtual Enterprises”

  1. I wonder if the virtual enterprise will become as common as what Richard Rosencrance referred to as the “Virtual State”:

    “Developed states are putting aside military and territorial ambitions as they struggle not for political dominance but for a greater share of world output. In the process, nations are shrinking—in function if not in geographic size. The nation-state is becoming a tighter, more vigorous unit capable of sustaining the pressures of worldwide competition. We are entering a world in which the most important resources are the least tangible—where land is less important than an educated populace, where stockpiles of goods, capital, and labor are less important than flows, and where parochial interests are less important than the international economy as a whole.”

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