In their book “Digital Capital,” authors Don Tapscott, David Ticoll and Alex Lowy cite the work of Ronald Coase, an economist who wrote seminal papers on the nature of the corporation in the 1930s and ‘40s. Together, these works paint a compelling before-and-after picture for how Internet-driven e-business will change the basic notion of “the firm” as we know it. And they carry significant implications for those charged with building e-business infrastructures.

According to Coase, corporations organize themselves in order to make affordable the transactions necessary to create goods and services. Because it was cheaper and more efficient to “own” many manufacturing or acquisition processes internally, most Industrial Age companies became vertically integrated monoliths. For example, Ford Motor not only manufactured cars; it also owned rubber plantations from which it drew raw materials for tires. But today the Internet is dramatically reducing the cost of going outside the confines of “the firm” to obtain the materials necessary to create valuable products.

The plummeting costs of transactions — and the interactions surrounding them — are already having a big impact on many businesses. Consequently, the Industrial Age firm is disaggregating and then reaggregating around e-business models that the authors of “Digital Capital” call business webs, or b-webs. Using the Internet as the infrastructure for communications and transactions, Digital Economy companies will leverage the core competencies of other companies in a b-web. The b-web will aggregate from other companies functions they may have once owned because it’s cheaper and more efficient to do so.