The paper addresses the effect of technological progress on the frontiers of the firm, building on transaction cost theory and agency theory. The model incorporates four types of costs: production, coordination, management, and transaction costs. The market has lower production costs, but higher...

Using two panels of U.S. manufacturing industries, this paper estimates capital adjustment costs from 1961 to 1996. I find that from 1974-83 adjustment costs rose sharply --they more that doubled from about 3% of output to around 7%. Moreover, this increase is specifically associated with a...