Kweku Opoku-Agyemang
Working Paper Class 63
The theory of the firm explains organizational boundaries primarily through the relative costs of market exchange and hierarchical coordination. This paper develops a general theory in which productive activity can instead be coordinated through markets, hierarchies, or distributed networks. The framework introduces portable network capital (informational, relational, reputational, and distributional capabilities that can reside with agents independently of firms) and allows coordination technologies to exhibit increasing returns to network scale. We characterize the endogenous formation of networks and organizational boundaries and derive conditions under which technological progress changes firm scale, concentration, and the allocation of activity across ownership boundaries. A central result is that productive networks and firms need not coincide: declining costs of communication, reputation, and coordination can allow productive relationships to remain distributed while ownership becomes less vertically integrated. The theory therefore replaces the market-versus-hierarchy dichotomy with an endogenous continuum of organizational forms, from autonomous agents and temporary coalitions to networked organizations and integrated firms. Social media and artificial intelligence are consequential in this framework not as separate sectors, but as technologies that alter the costs, portability, and scalability of economic coordination.
The views in this Working Paper Class are those of the authors, not necessarily of Machine Learning X Doing.
Opoku-Agyemang, Kweku A. (2026). "The Economics of Organizational Coordination: A General Theory of the Firm." Machine Learning X Doing Working Paper Class 63. Machine Learning X Doing.
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