Much of the interest and frustration connected with the virtual organization is fuelled by the same underlying cause: lack of clarity as to what exactly makes and organization ''virtual''. Managers and commentators seem to use the term to describe two rather different phenomena. In both cases virtual implies that things are not quite what they seem, but in different respects. One concerns lack of physical proximity, the other concerns lack of ownership. Despite this difference, the two types of virtual organization are indeed linked in one important way: they both concern the innovative management of organizational boundaries. (C) 1997 Elsevier Science Ltd.