Extension: Come Together: Firm Boundaries and Delegation
The boundary between a feature and a counterparty is not determined by technical integration alone. Alfaro and her coauthors show why ownership matters. Within firm boundaries, management can reassign control among integrated suppliers. Outside the firm, an independent supplier retains control through separate ownership. Non-integration has legal force, and reversal or dispute requires legal institutions between parties. The same mechanism applies when software crosses an economic boundary. The evidence is narrower than Kaal's claim. The study examines firms, input suppliers, and production decisions rather than plugins or sovereign agent runtimes. It does not establish that every external service demands the same institutional form. It establishes the controlling classification. A vendor-written plugin remains subject to the vendor's internal authority, control allocation, and accountability. A separately operated service retains its own decision rights and exposes the invoking firm to contracting frictions, ownership boundaries, and disputes between independent parties. Technical compatibility cannot collapse that distinction. Runtime architecture should therefore identify when an invocation leaves the vendor's governance boundary. At that point, institutional requirements attach to the relation: authority, contractual allocation, audit, remedies, and a forum for dispute.
ai-and-agentsinstitutional-designeconomicsfirm-boundariesoutsourcingcontract-governancedecision-rightsaccountability