Capabilities, Transaction Costs, and Firm Boundaries: An Integrative Theory

Organization Science, Forthcoming

39 Pages Posted: 19 Nov 2011

See all articles by Nicholas Argyres

Nicholas Argyres

Washington University in St. Louis

Todd Zenger

University of Utah

Date Written: August 18, 2011

Abstract

While the literature on firm boundaries has been greatly influenced by transaction cost economics, strategy scholars often emphasize the importance of capabilities considerations in these decisions. This has led to a debate that, we suggest, has generated more heat than light. We argue that the two sets of considerations are in fact so intertwined dynamically that treating them as independent, competitive explanations is fundamentally misleading. We offer a theoretical synthesis of transaction cost and capabilities approaches to firm boundaries that seeks to overcome each approach’s limitations, and provides a unified and logically consistent understanding of boundary decisions.

Keywords: capabilities, transaction costs, resource-based view, firm boundaries

JEL Classification: D23, L14, L22, L21, L33

Suggested Citation

Argyres, Nicholas and Zenger, Todd R., Capabilities, Transaction Costs, and Firm Boundaries: An Integrative Theory (August 18, 2011). Organization Science, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1961600

Nicholas Argyres

Washington University in St. Louis ( email )

One Brookings Drive
Campus Box 1208
Saint Louis, MO MO 63130-4899
United States

Todd R. Zenger (Contact Author)

University of Utah ( email )

David Eccles School of Business
1655 East Campus Center Drive
Salt Lake City, UT 84112
United States
801 585-3981 (Phone)
801 581-7939 (Fax)

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