ocation of inventories and materials flowing through its complex production systems, they were more likely to "double up" on materials and personnel as a backup to the inevitable misjudgments of the real-time state of play in a company (Greenspan, 2000). Thus, the knowledge that such production and personnel can now be more efficiently accessed externally will lead to outsourcing and the reduction in internal inefficiency. This increased efficiency will likely lead to increased production and the effect of economies of scale can significantly affect any given firm's place in the market structure, as demonstrated by the almost unprecedented wave of strategic alliances and merger activity as firms strive to take advantage of relationships not apparent before (Greenspan, 2000).
Greenspan contends that many of these alliances arise directly from the opportunities created by new information technology including, for example, those relevant to the Internet, telecommunications, and the media. Such alliances will have a significant effect on the market structure of not just the United States, but also the world, as demonstrated by the continuing attempts to merge America Online (AOL) with Time-Warner to create the largest entertainment firm in the world. Additionally, many high-tech companies that in fact wish to remain independent are now finding it necessary to enter into strategic alliances with firms developing competing technologies in an attempt to protect their own share of the market (Greenspan, 2000). Advances in information technology have also fostered mergers that allow firms to take greater advantage of economies of scale and thus reduce costs. On the other hand, the effect of many such mergers raises questions of monopolies and antitrust violations. As this paper will demonstrate, the traditional theories of diminishing returns and economies of scale have mutated application in a world characterized by information tech...