Capabilities, Transaction Costs, and Firm Boundaries

Although the literature on firm boundaries has been greatly influenced by transaction cost economics, strategy scholars often emphasize the importance of capabilities considerations in these decisions. This has led to a debate that, we suggest, has generated more heat than light. We argue that the t...

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Bibliographic Details
Published in:Organization science (Providence, R.I.) R.I.), 2012-11, Vol.23 (6), p.1643-1657
Main Authors: Argyres, Nicholas S., Zenger, Todd R.
Format: Article
Language:English
Subjects:
Analysis
Animated films
Boundaries
Business structures
capabilities
Competitiveness
Corporate governance
Corporate strategies
Cost analysis
Costs
Decision making
Economic costs
Economic resources
Economic strategies
Economic theory
Economics
Factor markets
Financial investments
firm boundaries
Investment strategies
Investment value
Logic
resource-based view
Studies
Transaction costs
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Summary:Although the literature on firm boundaries has been greatly influenced by transaction cost economics, strategy scholars often emphasize the importance of capabilities considerations in these decisions. This has led to a debate that, we suggest, has generated more heat than light. We argue that the two sets of considerations are in fact so intertwined dynamically that treating them as independent, competitive explanations is fundamentally misleading. We offer a theoretical synthesis of transaction cost and capabilities approaches to firm boundaries that seeks to overcome each approach's limitations and provides a unified and logically consistent understanding of boundary decisions.
ISSN:1047-7039
1526-5455
DOI:10.1287/orsc.1110.0736