"Organizational boundaries" is a term used in business and the legal profession mainly to distinguish one company from a separate but related company. C. Marlene Fiol writes in the June 1989 issue of "Administrative Science Quarterly" that organizational boundaries are imaginary dividers meant to distinguish a company from external but nearby influences. There are many theories about how organizational boundaries can be identified, and they are defined differently in the context of a business contract, a research project or day-to-day operations of a company.
Realist and Nominalist Approaches
Some believe how organizational boundaries are defined depends on who is defining them. The editor of the book "The Blackwell Companion to Organizations" describes two different approaches. The realist approach is when one member of the organization or research team identifies boundaries that are noticeable to them. The nominalist approach "adopts a conceptual perspective" to identify boundaries that could be relevant to the organization or research. The realist approach is used more frequently by members of an organization, while the nominalist approach is usually used in research contexts.
Spatial and Temporal Boundaries
Boundaries can also be defined as being spatial or temporal, as is done in day-to-day business management theory. Examples of spatial organizational boundaries include a company office, cubicle, retail store or work area, while temporal boundaries can be open office hours, individual schedules, company policies and deadlines. This can also be applied to determining the boundaries of self-sufficient or interdependent departments within a large company.
Yet another approach is to identify boundaries by examining the information and resources that are cyclically received, processed internally or sent outside of the organization. The information and resources that are not part of the cycle are outside of the organization's boundaries. A similar approach is to track interaction frequencies and pay attention to where they diminish, which is where the boundaries would be. In this state of thought, the organization consists of all activities the organization is involved in where participants have the ability to begin, continue or end behaviors. When the participants can no longer do so, they have crossed the organizational boundary.
Theories and Applications of Cyclical Boundaries
Fiol theorizes that there is a cyclical relationship between these boundaries, perceptions of self-control and the organizational unit. When members of the unit feel their self-control is being threatened, they make their perceptions of boundaries more concrete, which causes them to feel more self-control. Having cyclical boundaries is usually the preference when drawing up a legal contract for a joint venture or in evaluating on the day-to-day business management scale. They can also be used to preeminently gauge how likely a company is to enter into a joint venture agreement, because research has shown that executives who prize control and strong organizational boundaries are less likely to enter into such agreements where that control would be compromised.
Focus of Boundaries
Approaches to studying or dealing with organizational boundaries can vary in focus. They can examine the actors, or people involved with the organization that are affected by the boundary; the relations, what patterns of behavior are caused by the boundaries; and activities, what events are happening around or because of the organizational boundaries.