The article explores the impact of information technology (IT) on organizations and markets, focusing on how IT influences firm size and decision-making authority. It draws on economic theories, particularly agency theory and transaction cost economics, to analyze these effects. Agency theory views firms as a set of contracts among self-interested agents, leading to agency costs when the interests of principals and agents diverge. Transaction cost economics argues that firms are formed to reduce the costs of market transactions. The article presents a model of a firm that incorporates agency costs, transaction costs, and operational costs, showing how IT can affect these costs and, consequently, firm structure and decision-making. IT can influence the location of decision-making by reducing communication costs and monitoring costs, potentially leading to more centralized or decentralized decision-making. The article argues that decision rights should be located where the sum of decision information costs and agency costs is minimized. IT can also affect firm size by altering the cost structure, with cost-effective IT reducing external coordination costs and enabling firms to expand into markets or increase their size through internal coordination. The article also discusses the role of information systems in various organizational functions, such as operations, transaction processing, monitoring, and decision support. It highlights how IT can improve operational efficiency, reduce costs, and enhance decision-making. The impact of IT on organizations is multifaceted, affecting both the internal structure and external coordination. The article concludes that IT plays a crucial role in shaping organizational structures and market dynamics, influencing firm size, decision-making, and overall efficiency.The article explores the impact of information technology (IT) on organizations and markets, focusing on how IT influences firm size and decision-making authority. It draws on economic theories, particularly agency theory and transaction cost economics, to analyze these effects. Agency theory views firms as a set of contracts among self-interested agents, leading to agency costs when the interests of principals and agents diverge. Transaction cost economics argues that firms are formed to reduce the costs of market transactions. The article presents a model of a firm that incorporates agency costs, transaction costs, and operational costs, showing how IT can affect these costs and, consequently, firm structure and decision-making. IT can influence the location of decision-making by reducing communication costs and monitoring costs, potentially leading to more centralized or decentralized decision-making. The article argues that decision rights should be located where the sum of decision information costs and agency costs is minimized. IT can also affect firm size by altering the cost structure, with cost-effective IT reducing external coordination costs and enabling firms to expand into markets or increase their size through internal coordination. The article also discusses the role of information systems in various organizational functions, such as operations, transaction processing, monitoring, and decision support. It highlights how IT can improve operational efficiency, reduce costs, and enhance decision-making. The impact of IT on organizations is multifaceted, affecting both the internal structure and external coordination. The article concludes that IT plays a crucial role in shaping organizational structures and market dynamics, influencing firm size, decision-making, and overall efficiency.