Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Faculty & Research
  • Faculty
  • Research
  • Featured Topics
  • Academic Units
  • …→
  • Harvard Business School→
  • Faculty & Research→
Publications
Publications
  • 2020
  • Working Paper
  • HBS Working Paper Series

Design Rules, Volume 2: How Technology Shapes Organizations: Chapter 3 Transaction Free Zones

By: Carliss Y. Baldwin
  • Format:Print
  • | Language:English
  • | Pages:24
ShareBar

Abstract

In Chapter 2 we saw that the most economical locations for transactions in a task network are the so-called thin crossing points—places where transfers are easy to define, count and pay for. However, in many places in the task network, transfers of material, energy, and information are so dense and complex that the costs of treating each one as a transaction would be prohibitive. Such areas can become transaction free zones.
The purpose of this chapter is to build a theory of transaction free zones within a task network. I first consider how transaction free zones are related to the economic view that a firm is a “nexus of contracts.” I then explain how transaction free zones are created and governed. I describe three types of transaction free zones: (1) corporations in which all decision rights flow from a single, central authority; (2) commons organizations which govern through consensual rule-making and monitoring; and (3) collaborative communities with open boundaries which govern through consensus and shared norms.

Keywords

Modularity; Information Technology; Organizations

Citation

Baldwin, Carliss Y. "Design Rules, Volume 2: How Technology Shapes Organizations: Chapter 3 Transaction Free Zones." Harvard Business School Working Paper, No. 21-031, August 2020.
  • SSRN
  • Read Now

About The Author

Carliss Y. Baldwin

→More Publications

More from the Author

    • 2021
    • Faculty Research

    Computer-Implemented Methods and Systems for Measuring, Estimating, and Managing Economic Outcomes and Technical Debt in Software Systems and Projects: US Patent 11,126,427 B2

    By: Daniel J. Sturtevant, Carliss Baldwin, Alan MacCormack, Sunny Ahn and Sean Gilliland
    • 2020
    • Faculty Research

    Design Rules, Volume 2: How Technology Shapes Organizations: Chapter 7 The Value Structure of Technologies, Part 2: Strategy without Numbers

    By: Carliss Y. Baldwin
    • 2020
    • Faculty Research

    Design Rules, Volume 2: How Technology Shapes Organizations: Chapter 6 The Value Structure of Technologies, Part 1: Mapping Functional Relationships

    By: Carliss Y. Baldwin
More from the Author
  • Computer-Implemented Methods and Systems for Measuring, Estimating, and Managing Economic Outcomes and Technical Debt in Software Systems and Projects: US Patent 11,126,427 B2 By: Daniel J. Sturtevant, Carliss Baldwin, Alan MacCormack, Sunny Ahn and Sean Gilliland
  • Design Rules, Volume 2: How Technology Shapes Organizations: Chapter 7 The Value Structure of Technologies, Part 2: Strategy without Numbers By: Carliss Y. Baldwin
  • Design Rules, Volume 2: How Technology Shapes Organizations: Chapter 6 The Value Structure of Technologies, Part 1: Mapping Functional Relationships By: Carliss Y. Baldwin
ǁ
Campus Map
Harvard Business School
Soldiers Field
Boston, MA 02163
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Accessibility
  • Digital Accessibility
Copyright © President & Fellows of Harvard College