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Information Technology and Market Structure

Second, the increased efficiency of the firm's vertical integration will likely lead to outsourcing of inefficient production activities. Before the advent of access to almost instantaneous information availability, most business decisions were hampered by uncertainty. Because firms had limited and lagging knowledge of customers' needs and the location of inventories and materials flowing through its complex production systems, they were more likely to "double up" on materials and personnel as a backup to the inevitable misjudgments of the real-time state of play in a company (Greenspan, 2000). Thus, the knowledge that such production and personnel can now be more efficiently accessed externally will lead to outsourcing and the reduction in internal inefficiency. This increased efficiency will likely lead to increased production and the effect of economies of scale can significantly affect any given firm's place in the market structure, as demonstrated by the almost unprecedented wave of strategic alliances and merger activity as firms strive to take advantage of relationships not apparent before (Greenspan, 2000).

Greenspan contends that many of these alliances arise directly from the opportunities created by new information technology including, for example, those relevant to the Internet, telecommunications, and the media. Such al


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Information Technology and Market Structure. (1969, December 31). In Retrieved 17:18, October 24, 2014, from
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