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Holmstrom Roberts (1999) - The Boundaries Of The Firm Revisited (view source)
Revision as of 21:50, 1 December 2010
, 21:50, 1 December 2010no edit summary
==Historic Literature Summary==
The theory of the firm starts with [Coase (1937) - The Nature Of The Firm |Coase (1937)] - who proposed '''transaction costs''' in a world of imperfect information as the answer. [Williamson (1979) - Transaction Cost Economics | Williamson ] (1975,1985, etc), refines this to center on the hold-up problem. The classic hold-up story is in Klein, Crawford, Alchian (1978) (car bodies), and was modelled by Grout (1984). It uses the notion of relational specific investments.
'''Property rights theory''', starting with [Grossman Hart (1986) - The Costs And Benefits Of Ownership |Grossman and Hart (1996) ] and refined by Hart and Moore (1990) was a distinct but somewhat similar branch.
Williamson's [Williamson (1979) - Transaction Cost Economics |TCE ] paradigm has three features:
*The '''Fundamental Transformation''' that "occurs when an exchange relationship moves from an ex ante competitive situation, with large numbers of potential trading partners, to an ex post, small-numbers one, once commitments have been made".
*Asset-specificity is the aggregate level of quasi-rents. If this is measured by V - (V_b + V_s), only the sum (V_b + V_s), rather than the individual values matter
===Resolving Agency Problems===
Should sales force members be hired or contracted? While asset specificity might provide some guidance, it turns out empirically that measurement and agency costs are central. Employees are used when:
