This paper proposes that transaction costs and capabilities are fundamentally intertwined in the determination of vertical scope, and identifies the key mechanisms of their co-evolution. Specifically, we argue that capability differences are a necessary condition for vertical specialization; and...

The aim of this arti cle is to show that the New Insti tuti onal Economics is an interdisciplinary stream combining economics, law, organizati on theory, politi cal sciences, sociology, and anthropology. The main theories which are part of the New Insti tuti onal Economics are: Agency Theory,...

While 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...

In 1977, when Alfred Chandler's path-breaking book The Visible Hand appeared, the large vertically integrated "Chandlerian" corporation had dominated the organizational landscape for nearly a century. In some interpretations, possibly including Chandler's own, The Visible Hand and subsequent...

It has become commonplace in management research to refer to “transaction cost theory,” a joint Coase-Williamson approach to economic organizing. This off-the-cuff usage overlooks their differences by treating Coase as a pre-Williamsonian. I argue that their theoretical frameworks are...

This paper attempts to formalize the transaction cost theory of the firm. Building on the formal approach of Grossman and Hart (1986), a model is developed to capture the essential elements of the transaction cost theory, particularly those that are distinct from the formal property rights...

This paper studies the effect of trade facilitation on vertical firm structure using plant-level data from Switzerland. Based on the Business Census and the Input-Output table, we first calculate a binary measure of vertical integration for all plants registered in Switzerland. We then estimate...

In the present paper we introduce a general equilibrium model of the organization of production and analyze the optimality and existence of an equilibrium.We introduce the production technology of the economy as a collection of production processes and allow each potential producer to choose the...

The functional relationships between the price vector and consumer's Marshallian demand and/or producer's optimal actual sale will be directly revealed respectively by two new geometric methods in general equilibrium framework without storage. The impact of transaction cost shared by individual...