Abstract: The New Economy Business Model and the End of the "Organization Man"
This paper documents and analyzes the evolution of the "New Economy business model" (NEBM) over the past half century. Through the high-tech boom, bust, and recovery of the past decade, the NEBM has emerged as dominant in the U.S. information and communication technology industries, and elements of the NEBM have spread abroad. Strategy, finance, and organization are distinctive in the NEBM compared with the Old Economy business model (OEBM) that had evolved during the first half of the twentieth century. Strategically, the NEBM is highly focused on specific products and processes in contrast to horizontal diversification and vertical integration under the OEBM. Financially, under the NEBM, firms tend to pay no dividends, using all their retained earnings to fund growth. When they have grown large, however, NEBM firms engage in repeated large-scale stock repurchases so that they can better use their stock as a currency to acquire technology companies and, in the form of stock options, to compensate a broad base of employees. Organizationally, these employees tend to be highly educated, and routine production activities are automated and outsourced. The NEBM stresses the interfirm mobility of labor and the globalization of employment, with increasingly higher value-added activities being performed outside the United States. In historical perspective, the NEBM is the end of the "organization man."