The Concept of the Firm in the Network Economy

The introduction of technological tools and new social media has not only allowed processes to be carried out virtually, but has raised the question of whether a firm is a necessary element in resource coordination. When everything is in the networks, do we still need the firm, or can we coordinate via LinkedIn or Twitter? This work builds on the shared understanding creation framework to shed light on one of the rationales for a firm’s existence in the age of new social media. By applying qualitative methods and collecting data from five firms operating in the network environment, the complexity of shared understanding creation in the network environment is acknowledged. Building on the results, mechanisms for shared understanding creation are identified and summarized into a comprehensive model.