The Headless Firm: How AI Reshapes Enterprise Boundaries

• URL: http://arxiv.org/abs/2602.21401v1
• Date: Tue, 24 Feb 2026 22:13:14 GMT
• Title: The Headless Firm: How AI Reshapes Enterprise Boundaries
• Authors: Tassilo Klein, Sebastian Wieczorek,
• Abstract summary: We argue that agentic AI induces a structural change in how coordination costs scale.<n>We formalize this claim as a coordination cost model with two falsifiable empirical predictions.
• Score: 5.856292656853395
• License: http://creativecommons.org/licenses/by/4.0/
• Abstract: The boundary of the firm is determined by coordination cost. We argue that agentic AI induces a structural change in how coordination costs scale: in prior modular systems, integration cost grew with interaction topology (O(n^2) in the number of components); in protocol-mediated agentic systems, integration cost collapses to O(n) while verification scales with task throughput rather than interaction count. This shift selects for a specific organizational equilibrium -- the Headless Firm -- structured as an hourglass: a personalized generative interface at the top, a standardized protocol waist in the middle, and a competitive market of micro-specialized execution agents at the bottom. We formalize this claim as a coordination cost model with two falsifiable empirical predictions: (1) the marginal cost of adding an execution provider should be approximately constant in a mature hourglass ecosystem; (2) the ratio of total coordination cost to task throughput should remain stable as ecosystem size grows. We derive conditions for hourglass stability versus re-centralization and analyze implications for firm size distributions, labor markets, and software economics. The analysis predicts a domain-conditional Great Unbundling: in high knowledge-velocity domains, firm size distributions shift mass from large integrated incumbents toward micro-specialized agents and thin protocol orchestrators.

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