Competencies as Private Information: An Efficient Capital Asset Pricing Theory of the Firm

Competencies-based theories of the firm are extended beyond current literature - focused only on flow-markets, to the context of the efficient pricing of competencies as capital-assets. It is shown that the combination of insider information and complementarity to the insider's production function - very likely under path-dependency - rules out the necessitiy of assuming tacit knowledge or transaction costs in external flow-markets. Path-dependency and transaction cost theories of the firm are synthesized to explain internalization, in which internalization depends on various combinations of private information, transaction costs and complementarities in the production function.