Evolution of a Firm in a Digital Economy

DOI: 10.20542/0131-2227-2019-63-8-21-28
N. Rozanova (nrozanova@hse.ru),
National Research University Higher School of Economics (HSE), 20, Myasnitskaya Str., Moscow, 101000, Russian Federation
Abstract. The latest investigations in the area of firms’ behavior in a digital economy have revealed a wide variety of new phenomena that have to be analyzed, systemized and interpreted. The article presents a conceptual approach to deal with these current novelties. In a digital economy, many traditional features of firm, competition, and market have been wearing off. Rapidly changing digital environment caters for agility, network interactions, flexible ICT architecture, and entrepreneurship. Information technologies have changed their role from simple infrastructure resource to a key driver of contemporary business. IT are now an important organizational resource for competitive agility, improving firm performance during economic turbulence. The IT principles presented in Agile Manifesto have applied to project management, with high results in firm financial and economic performance. This process has revealed the necessity of new competence, for both employees and employers. New key positions have arisen in the firms; Chief Digital Officer is an example. The current firm activity is traced out with increasing intensity of global competition that stimulates business actors to form business digital networks. Complex business systems have evolved into scale-free networks the main feature of which is clusterization. In scale-free economic networks, the traditional principle of free competition as random walk is no more valid. The business units form clusters within their digital network, some companies being dominant actors with network market power. Among the determinants of dominant position in the digital network are as follows: agent costs, business experience, access to key resources, capital and labor assets, investment potential. Free competition has evolved into network digital rivalry. The network digital rivalry has a dynamic wavy pattern. Competitive pressure may increase or decrease when key players enter or exit from the digital network. Thus, the network digital rivalry has become a new factor in economic cycles. As more and more firms are in global business networks having less and less independent production, sales, or consumption activity, and when firms use to more and more extent mobile organizational devices instead of visible working areas, the traditional viewpoint for a company as a solid well-defined organization should be replaced by a concept of firm as a flexible function not an organization. The evolution of business activity has been going from companies and markets to business digital networks.

Keywords: firm, management, digitalization, agile organization, organizational behavior, network structures


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For citation:
Rozanova N. Evolution of a Firm in a Digital Economy. World Eonomy and International Relations, 2019, vol. 63, no. 8, pp. 21-28. https://doi.org/10.20542/0131-2227-2019-63-8-21-28

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