Beyond Spot Markets: How Thick Sociality in Online Labor Markets is Reshaping Firm Boundaries
Source: https://www.semanticscholar.org/paper/a158bc84c16eae578d184daa29b115be18809944 ↗
The paper's central move is to challenge a foundational assumption in the theory of the firm: that complex, co-specialized work cannot be contracted out.
By introducing the concept of 'thick sociality' — the dense relational infrastructure that firms generate internally — and showing empirically that online labor markets are now capable of replicating it, the authors shift the analytical frame from transaction costs alone to social structure as a determinant of firm boundaries.
This is the kind of institutional question Coase and Williamson raised and that digital platforms have made newly urgent; the paper earns its place in that lineage by extending the framework rather than merely applying it.
For product directors leading platforms or making build-vs-buy-vs-outsource decisions, the two mechanisms identified (freelancer collaboration on non-decomposable work; trust accumulation between firms and freelancers) offer a genuinely useful analytical lens.
The platform-economics gap in the library is real, and this paper addresses it with an explicit theoretical extension rather than a domain-calibration exercise.
Central argument
Riedl, Jensen, Fulker, and Alexy argue that the classical reason firms internalize complex work — that co-specialized, non-decomposable tasks require the relational infrastructure only organizations can provide — is being undermined by online labor markets. They introduce 'thick sociality' to name this relational infrastructure and demonstrate empirically that platforms now generate it externally through two mechanisms: freelancers collaborating on work that cannot be cleanly partitioned, and accumulated trust between firms and specific freelancers. The implication is that firm boundaries should shift outward, because a key transaction-cost justification for internalization no longer holds as categorically as Williamson assumed.
Critique
The paper's empirical case likely captures a favorable slice of online labor market activity — knowledge work on platforms where reputation systems and repeated interaction are already mature — which limits how far the findings generalize to sectors where thick sociality depends on embodied, physical co-presence or tacit knowledge that platforms structurally cannot encode. There is also a potential endogeneity concern: firms that successfully externalize complex work through platforms may already possess unusually strong contracting and vendor-management capabilities internally, meaning the platform may not be doing the relational work the theory attributes to it. The causal story connecting platform-generated sociality to actual boundary change, rather than to a selection of already-boundary-permeable firms, deserves sharper treatment.
Why it matters for product
For a CPO deciding whether to build a capability in-house, contract it to a specialist, or cultivate a semi-permanent network of freelancers, the two mechanisms the paper identifies — collaboration on non-decomposable work and accumulated bilateral trust — offer a concrete diagnostic: if your platform or vendor relationships have already generated these properties, the organizational case for hiring is weaker than intuition suggests. This also reframes platform product strategy: designing for repeat engagement and cross-freelancer collaboration is not just a retention metric but a structural feature that determines whether your platform can compete for the complex, high-value work that firms currently keep internal.