Firms operate within a "dense network of co-operation and affiliation" (Richardson, 1972). a mode of organising production that has raised issues related to the need for co-ordination.
With this paper we propose a further perspective, going back to the concept of a firm and locating it in a context of production characterised by linkages between more or less complementary organisations. In particular we suggest that the modalities of co-ordination that characterise production networks have important implications for the definition of firms' boundaries. To highlight the differences between different network organisations, we analyse firms' boundaries in three different production contexts: 1) the capitalist firm; 2) networks of direction; 3) networks of mutual dependence. Although other forms of production can be analysed using existing economic concepts such as transaction costs and economic power, an explanation of what holds together networks of mutual dependence, given their nature, requires a new concept. For this reason we introduce the idea of "mental proximity", to indicate actors' degree of compatibility in strategies, objectives, and means to achieve them.
Our conclusions emphasise how the definition of a firm's boundaries is dependent on the pattern of strategic influences that the firm can exert on others. Building on the results of our analysis, we explore the implications that direction and mutual dependence have for the positive freedom of economic actors.