Can J Adm Sci Copyright © 2010 ASAC. Published by John Wiley & Sons, Ltd. 78 27(1), 78–80 (2010) Boundary Decision, Embededness, and the Co-Creation of Value: Authors’ Response to Commentary Erik Rolland University of California Raymond A. Patterson The University of Alberta Keith F. Ward St. Edward’s University Canadian Journal of Administrative Sciences Revue canadienne des sciences de l’administration 27: 78–80 (2010) Published online in Wiley Interscience (www.interscience.wiley.com). DOI: 10.1002/CJAS.140 Dr. Maglio makes an excellent point: he calls for more research on the intersection of the firm’s external capabilities and resources with those of the customer. In our previous paper (Rolland, Patterson, & Ward, 2009), we created a starting point for a line of thinking similar in spirit to the firm boundary decisions that have been quite frequently addressed in the outsourcing literature. That is, we have focused on finding a balance between what an organization outsources versus what it retains internally. The discussion goes back to the fundamental make-or-buy question that production literature dis- cussed decades ago. The service version of this question is how to combine the customer’s capabilities and oppor- tunities with the the firm’s capabilities and resources. In this way the firm and the customer co-create the service product. The consideration of firm boundaries is not new in this case. Boundary (or outsourcing) decisions are driven by transaction cost analyses, and economic change in a firm is managed through a governance mechanism (Barney, 1999). According to this line of thinking, there are three traditional categories of governance between cooperating firms: 1. Market governance, where exchanges are managed in a “faceless” market, and where market-determined prices prevail; 2. Intermediate governance, where complex contracts and forms of strategic alliances are used; and 3. Hierarchical governance, where the exchange is brought into their own boundary (such as through a subsidiary). What is new about Maglio’s point is that boundary decisions are less about the governance of the relation- ship, and that the relationship is no longer only about cooperating firms and more about customer-partners (in the original paper we labelled this relationship the extended resource-based view). It helps to view this through a simple example, so we examine the interaction between a restaurant and a customer. The overlap of the restaurant’s processes and the customer’s processes include (as a minimum) order-taking, order-delivery, and payment. Now, this does not have to be so. Maglio’s point is that the role of either or both parties’ processes can be enlarged or shrunk, which in our framework means to include or exclude interaction points. That is, we can shift the responsibility of either party to be more or less inclusive, or shift the type of interaction to make things more efficient or valuable for one party and hope- fully for both parties. For example, we could allow a restaurant’s customers to order using their smart phones while they are at the table (or even before they are seated, if we assume excellent coordination to be a capability of the service-firm). Likewise, the customer could be involved in his or her own food-preparation (assuming he or she finds value in this). The examples provided by Maglio, using the terms self-service and super-service, are about the *Please address correspondence to: Raymond A. Patterson, Ph.D., Accounting & MIS, School of Business, The University of Alberta, 4-30E Business Building, Edmonton, AB, Canada, T6G2R6. Email: ray.patterson@ualberta.ca