Trademarks and the Boundaries of the Firm

Abstract

Coase’s theory of the firm has become a familiar tool to analyze the structure and organization of businesses. Such analyses have increasingly focused on property based theories of the firm, including intellectual property. In previous work we have discussed the application of this model to patents, copyrights, and trade secrets. Here we take up the theory of the firm with regard to trademarks, which act as signals of firm reputation, and so have application and effects that differ substantially from other forms of intellectual property. Using the framework from our previous analyses, we examine the propensity of trademarks to lower transactions costs between firms, as well as within firms, suggesting that such doctrines will have significant effects on the size and structure of the firm.

Keywords: trademark, intellectual property, reputation, Coase, theory of the firm, franchise

JEL Classification: D21, D23, L11, L14, L22, L23, O34