This article explains firm emergence and the role of firms in the market structure using the productive power of specialization. Based on productivity efficiencies through technological specialization, a model for firm emergence is drafted alongside Coasean transaction cost theory. I find that...

Recent scholarship has begun to assess the role of intellectual property rights in the theory of the Coasean firm. Some of this scholarship has looked at the effects of intellectual property on decisions to "make or buy" inputs to production. Other scholarship has looked at the effects of...

In the Grossman-Hart-Moore property rights theory, there are no frictions ex post (i.e., after non-contractible investments have been sunk). In contrast, in transaction cost economics ex-post frictions play a central role. In this note, we bring the property rights theory closer to transaction...

An economic theory of the firm must explain both when firms supplant markets and when markets supplant firms. While theories of when markets fail are well developed, the extant literature provides a less than adequate explanation of why and when hierarchies fail. In this paper, we seek to...

Over the last decades, the internationalization of the value chain has allowed firms to exploit cross-country differences in environmental and labor regulation (and enforcement) in ways that have led to a large number of NGO campaigns and consumer boycotts criticizing "unethical" practices. How...

This paper offers a rationale for limiting the delegation of (real) authority, which neither relies on insurance arguments nor depends on ownership structure. We analyse a repeated hidden action model in which the actions of a risk neutral agent determine his future outside option. Consequently,...

Research in the “theory of the firm” tradition has often characterized firms as subeconomies in which economic exchange is shaped by a central authority. We propose an expanded view of firms as subsocieties in which authority is further responsible for establishing principles that shape...

This paper investigates the role of the market for knowledge in shaping firm hierarchy—that is, the span of control and the number of layers. We predict that, the larger the extent of the market for knowledge, the larger the span of control and the fewer the layers. We test our predictions...

The firm was evicted from economic analysis for a long time. It appeared as a particular and substantial "scope" thanks to the economist R.H. Coase at the end of the 1930'S but sunk into oblivion for three decades. This paper deals with the 1970's renewal of interest in the theory of the firm,...

In the property rights approach to the theory of the firm, ownership matters if parties have to make partly relationship-specific investments, but ownership would be irrelevant if the investments were completely relationship-specific. We show that if negotiations after the investment stage...