This paper explores the economic processes through which information technology can facilitate coordination within and between firms. The paper presents and analyzes a case study of the B-2 “Stealth” bomber, an aircraft that was designed by four firms almost entirely by computer. The key information systems used in the project were (1) a common-access database to manage part designs and (2) an advanced system to perform structural analysis. These systems played a crucial role in enabling the four firms to coordinate their design and development activities precisely enough to meet the demanding engineering requirements imposed by the aircraft's unique mission. The paper analyses the case study using transaction cost, agency, and information processing theories. The analysis leads to several conclusions about the mechanisms through which the variables emphasized in these theories operated to improve coordination. First, the information systems aided coordination directly by making information processing less costly. Second, this enhanced information processing made the governance of the project more efficient. In particular, by establishing a “technical grammar” for communication, the systems helped to create social conventions around which firms could coordinate their activities, thus limiting the need for a hierarchical authority to promote coordination. This technical grammar also reduced governance costs by reducing asset-specificity, thereby reducing risks associated with contractual holdup. These interactions between communication and governance effects have not been elucidated in the IT/coordination literature. They are important in part because they help explain why the vertically disintegrated organization of the project proved viable. Finally, the systems facilitated decentralized decision-making by reducing agency (measurement) costs. This combination of effects may generalize to other settings in which information technology is used to promote coordination, especially in “virtual” or “disaggregated” corporations.

Although the literature on firm boundaries has been greatly influenced by transaction cost economics, strategy scholars often emphasize the importance of capabilities considerations in these decisions. This has led to a debate that, we suggest, has generated more heat than light. We argue that the two sets of considerations are in fact so intertwined dynamically that treating them as independent, competitive explanations is fundamentally misleading. We offer a theoretical synthesis of transaction cost and capabilities approaches to firm boundaries that seeks to overcome each approach's limitations and provides a unified and logically consistent understanding of boundary decisions.

Organizational forms involving more detailed contracts than are found in traditional spot market exchanges appear to be increasingly prevalent. There has been relatively little analysis, however, of the extent to which firms learn how to use contracts to manage their interfirm relationships over time. In this paper, we conduct a detailed case study of a time series of 11 contracts concluded during 1989–1997 between the same two partners, both of whom participate in the personal computer industry, to explore whether and how firms learn to contract. We find many changes to the structure of the contracts that cannot be fully explained by changes in the assets at risk in the relationship, and evidence that these changes are largely the result of processes in which the firms were learning how to work together, including learning how to contract with each other. The nature of this learning appears to have been quite incremental and local, that is, not very far sighted. We suggest how and when contracts might serve as repositories for knowledge about how to govern collaborations, and suggest some boundary conditions for this phenomenon. Our findings also provide implications for the debate about whether contracts have a positive or negative effect on interorganizational trust. We conclude with suggestions for future research.

An increasing volume of business activity appears to be occurring via alliances or other interfirm arrangements in which complex contracts are featured, yet there has been relatively little study of contract design in the strategy or management literatures. The economics literature on contracting has been extensive, but it has been less concerned with learning and evolution—phenomena in which strategy and organization scholars are deeply interested. In this paper, we investigate the relationship between two types of contractual provisions that are important in high-technology contracts, or contracts for which environmental uncertainty or technological complexity are significant, namely, contingency planning and task description. Previous research suggests that contracts can vary significantly in the degree of detail with which such key provisions are written, and that they are each subject to learning. In this paper, we find evidence from a sample of 386 contracts that contingency planning and task description behave as complements in contractual design. We argue that this complementarity reflects patterns of learning to contract. We also find that repeated exchange between two firms leads to greater effort at contingency planning in subsequent contracts, a finding that is also consistent with learning effects, but not with frequently made claims that contracts and trust are substitutes.

For decades, the literatures on firm capabilities and organizational economics have been at odds with each other, specifically relative to explaining organizational boundaries and heterogeneity. We briefly trace the history of the relationship between the capabilities literature and organizational economics, and we point to the dominance of a “capabilities first” logic in this relationship. We argue that capabilities considerations are inherently intertwined with questions about organizational boundaries and internal organization, and we use this point to respond to the prevalent capabilities first logic. We offer an integrative research agenda that focuses first on the governance of capabilities and then on the capability of governance.

Abstract Research Summary The last decade has witnessed an increasing interest in the use of history and historical research methods in strategy research. We discuss how and why history and historical research methods can enrich theoretical explanations of strategy phenomena. In addition, we introduce the notions of “history‐informed strategy research,” distinguishing between the dimensions of “history to theory” and “history in theory” and discussing various under‐utilized methods that may further work on history‐informed strategy research. We then discuss how contemporary research contributes to history‐informed research within the strategy field, examine key methodological and empirical challenges associated with such research, and develop an agenda for future research. Managerial Summary Firms are increasingly making use of their historical past as they reflect on their identities and how these can be used strategically. At the same time, strategy researchers are paying increasing to the use of historical research methods, as well as to how firms use history strategically. We take stock on the role of history in strategy research, outline the key strategic issues that can be informed by a historical way of doing research, discuss the available historical methods, and offer suggestions for future research in the history/strategy intersection.