That boundary may be a sealing fault, a pinchout, or the meeting point with the drainage of an offset well. Inside it, the well is the sink. The radius used in a pseudo-steady productivity calculation is this distance, or an equivalent radius for a non-circular area.
It is not the radius of investigation of a well test. The investigation radius grows with time and with permeability and only says how far the pressure signal has travelled by the end of the test. A test that has not felt a boundary has not measured the drainage radius.