ARE CAPABILITY-BASED THEORIES OF FIRM BOUNDARIES REALLY DISTINCT FROM TRANSACTION COST THEORY?

Abstract

This article examines the conceptual differences between capability-based theories of firm boundaries and transaction cost theory. The article argues that there is considerable difficulty when distinguishing the concepts. Recent research on the issue conducted by R. Carter and G. Hodgson is discussed. It is the view of the author's that literature and research on the determinants of firm boundaries harbors a misleading thread, insisting instead that scholars treat capabilities considerations as intertwined with the logic of transaction cost.

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