Beyond markets and hierarchies: How GenAI enables unbounded cognitive fusion

Abstract Traditional organizational coordination theories assume fixed human cognitive constraints that necessitate the market-hierarchy distinction. Generative artificial intelligence (GenAI) fundamentally alters these assumptions by augmenting human cognitive capabilities across organizational boundaries. This position paper demonstrates how existing frameworks, i.e., Transaction Cost Economics and Electronic Markets Hypothesis, cannot explain emerging organizational phenomena like GitHub Copilot’s recursive value creation or AI-mediated expert networks. We introduce unbounded cognitive fusion (UCF) as a new theoretical framework explaining coordination through cognitive synthesis rather than price signals or authority structures. Three emergent organizational forms illustrate UCF principles: cognitive meshworks (coordinated through competence synthesis), algorithmic ecosystems (achieving emergent optimization), and hybrid intelligence collectives (operating through cognitive complementarity). While boundary conditions limit UCF applicability in contexts requiring human accountability or embodied knowledge, this framework provides a theoretical foundation for understanding organizational coordination when GenAI transforms cognitive constraints from scarce to abundant resources.