Knowledge, scale and transactions in the theory of the firm

Firms in market economies vary enormously in size, nature and competitiveness. In this important contribution to the literature on the theory of the firm, Mario Morroni provides a new analytical framework which improves our understanding of the causes of this diversity in organisational design and performance. The relations between internal and external basic conditions, decision-making mechanisms and organisational coordination are addressed, as are the circumstances in which capabilities, transactions and scale-scope considerations interact. With the emergence of the knowledge-based economy and the increasing pressure of global competition, the development of capabilities is acquiring ever greater importance in boosting competitiveness. Morroni shows that long-term relational agreements enhance learning processes and offer powerful tools for improving competitiveness in a context of conflicting interests, incomplete knowledge, and uncertainty.