The survivor principle holds that the competitive process weeds out inefficient firms, so that hypotheses about efficient behavior can be tested by observing how firms actually behave. This principle underlies a large body of empirical work in strategy, economics, and management. But do...

We review theory and evidence on corporate diversification, industry structure, and firm strategy from an organizational economics perspective. First, we examine the implications of transaction cost economics (TCE) for diversification decisions. TCE is essentially a theory about the costs of...

Ronald Coase's landmark 1937 article, “The Nature of the Firm,” framed the study of organizational economics for decades. Coase asked three fundamental questions: Why do firms exist? What determines their boundaries? How should firms be organized internally? To answer the first question,...