With the sustained rise of peer production, the traditional role of the firm is on the cusp of transformation. In this essay, Yochai Benkler explains how decreasing transaction costs and the increasing importance of innovation are throwing into question classic theories of the firm, as well as what the future might hold.

Benkler argues that peer production (e.g., wikipedia, free open source software, online labour markets such as MTurk, etc.) challenges long-held assumptions about the firm by: 1) placing social motivation instead of material incentive at the core of innovation; 2) challenging the centrality of property and ownership to growth; and 3) challenging the primacy of firms in the innovation process.

In the future, as transaction costs continue to collapse and networks of people and resources are able to easily orchestrate themselves, Benkler suggests that pro-social and intrinsic motivations will become a key strategic focus for successful firms. In particular, those able to build communities of meaning around economic collaboration will be in a better position to gain advantage over dynamic, fluid networks of collaborators.