The Nature of the Open Firm

In 1937 British economist Ronald Coase introduced the idea of Transaction cost and rationalized the creation of firms for running business. The reason for creating a firm according to him was to save transactions costs- by bringing in certain economic activities within the firm thereby avoiding everyday risk of contacting market for those services or resources. Since then, every theory of business strategy and organization assumes the bringing a set of economic activities within the gamut of an enterprise a priori and they only differ in deciding which activity to bring inside and which one to be left outside (core competence, core activity, dynamic enterprise examples).




With the advent of floating fund of resources- namely open-ended data streams and freely available tools- unleashed by the web- it is possible to create a value offer- by assembling those resources without taking them inside of an enterprise. I have set an enterprise at http://educationonly.googlepages.com. Its value proposition is – focused information provision on Indian education- by combing various-data streams – such as web searches- non-web data streams such as newspaper cuttings and paper-based directories.




I guess that I have created a new category of enterprise-which I call – the open enterprise. In this I have not brought in anything inside the enterprise.




Please comment on the following

Have I stumbled upon a new firm which demands new definition of a firm – as contrast to the one proposed in The Nature of the Firm- by R H Coase

If so, how I develop this concept further?

The Nature of the Open Firm

Business may be defined as a process that converts outside resources into outside economic results. Firms are created to enact value creation process. They identify an outside resource, procure them and process them to add value and release it back to market to get economic rewards.

Time is ripe for conceiving and building a new category of business firm entirely on the world wide web. Historically business may be seen as a process of identifying resources and converting them into economic values. Changing nature of resources have determined the nature of business and kinds of organizations created to conduct business. Discovery of iron created mining enterprises and invention of steam engine created transportation industry and factories.

The floating fund of data on the web represents the newest of business resources. One can imagine towards creating a new kind of business firm, cyberfirm to be built on these resources
Today the web has unleashed one of the most potent resource. It is the open-ended floating fund of data and resources stream. This stream is globally accessible.

The open firm is intended to create value out of this stream and a create a business around that. The entire range of activities of open firm happen on this stream. The resources needed for creating value, the process that is needed to create value, the market for its results are all found and realized on this stream