Journal
ORGANIZATION SCIENCE
Volume 23, Issue 6, Pages 1643-1657Publisher
INFORMS
DOI: 10.1287/orsc.1110.0736
Keywords
capabilities; transaction costs; resource-based view; firm boundaries
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Although 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.
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