On Recent Essays About Firm Boundary Theories

Three main approaches dominate the current debate of firm boundaries,which are transaction cost economics,resource-based view,and the option perspective.Transaction cost economics emphasizes the necessity of combinative consideration of market and hierarchies which respectively leads to transaction costs and hierarchical costs.The calculus of comparative advantage between transaction costs and hierarchical costs articulates the determination of firm boundaries.The resource-based view claims that the degree of connectivity between the corporate resources and the outside resources drives firms to adopt hierarchical control,market control,or a hybrid mode in a resource acquisition activity.With a long-term perspective,the option one argues that the governance mode,such as market or hierarchy,for resource acquisition largely pertains to the corresponding technological uncertainty and business risk.Actually,the three theories explore the efficiency of governance mode for resource acquisition from different strategic position.