The article discusses how information technology is shifting the balance from hierarchies to markets in coordinating economic activity. It argues that as information technologies reduce coordination costs, markets will become more prevalent. The paper explores the factors that influence whether markets or hierarchies are more effective, such as asset specificity and product description complexity. It also examines historical changes in market structures, such as the impact of the telegraph on the development of national markets and integrated hierarchies. The article then applies this framework to contemporary developments, discussing how electronic markets and hierarchies are evolving. It highlights the emergence of electronic interconnections, the shift from hierarchies to markets, and the motivations for establishing electronic markets and hierarchies. The paper concludes by discussing the potential for further evolution of electronic markets, including the development of personalized markets that provide decision aids to buyers.The article discusses how information technology is shifting the balance from hierarchies to markets in coordinating economic activity. It argues that as information technologies reduce coordination costs, markets will become more prevalent. The paper explores the factors that influence whether markets or hierarchies are more effective, such as asset specificity and product description complexity. It also examines historical changes in market structures, such as the impact of the telegraph on the development of national markets and integrated hierarchies. The article then applies this framework to contemporary developments, discussing how electronic markets and hierarchies are evolving. It highlights the emergence of electronic interconnections, the shift from hierarchies to markets, and the motivations for establishing electronic markets and hierarchies. The paper concludes by discussing the potential for further evolution of electronic markets, including the development of personalized markets that provide decision aids to buyers.