Firms can be analyzed from the resource or product aspect. This paper develops simple economic tools for analyzing a firm's resource position, and uses a resource product matrix to examine some strategic options suggested by the resource-based view. The resource-based view provides basis for...

We study the division of labor within an industry, formulate it as a generalized make-or-buy problem, and characterize the optimal allocation of work as that minimizing the sum of adjustment-costs within and between firms. Using a unique dataset on eight segments of the global automobile...

The parties to a contract typically make a lot of decisions during the time it is in force, and the paper is based on the premise that it takes time to be involved in any one of these decisions. Attempts to economize on decision-making time then imply that the parties may write a contract in...

We look at a principal-agent model in which the agent has to perform an action, the difficulty of which is better known ex interim than ex ante. We compare two contracting regimes; one with commitment to an ex ante negotiated contract, and one with an ex interim negotiated contract. The ex ante...

In order to push a customer and market orientation deep into the organization many firms have adopted systems by which internal customers rate internal suppliers on some measure-- often satisfaction. The internal supplier receives a larger reward for a higher rating. We examine incentive systems...

We contrast transactions in markets with those in firms and characterize the optimal numbers in each. Governance structures appear as equilibria and are compared in terms of production costs -- determined by a tradeoff between specialization and adaptation, -- and bargaining costs. Under natural...

We propose a theory of the scope of the firm, and offer supporting evidence. The theory suggests that multi-business firms exist because they allow better deployment of factors that, because of sub-additive transactions costs, cannot be traded in fractions or rented for short periods. It...

This paper deals with bounded rationality as a way to describe behavior and focuses on the question of how to build such boundedly rational models. The first part is a discussion of the reasons why such models are needed and on the situations in which they can be regarded as more particularly...

We look at the economic functions of firms, contracts, and markets and characterize the optimal scope of the firm. Governance structures appear as equilibria and are compared in terms of production costs - determined by a tradeoff between standardization and adaptation - and adjustment costs -...

In the context of an employment relationship, I present an argument suggesting that it is more efficient for the boss to own productive assets. The idea is that a conflict between productivity and depreciation is internalized if the player deciding what an asset is used for also has residual...