Learning and Profitability in a Theory of the Firm

Teams combine tacit and separable knowledge so complicating the pricing of knowledge and mitigating against knowledge transfer between firms. The efficient markets hypothesis suggests that entities possessing insider information should be ablest at accurately pricing any given complementary set of knowledge. Thus, even though some knowledge in a given complementary set is separable from a team, the easily transferable pieces are still most likely to be used within the originating firm. The boundaries of a firm may therefore expand even when knowledge is not tacit and transaction costs in markets for ideas are otherwise low.