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- Title
Testing altermative theories of the firm: Transaction cost, knowledge-based, and measurement...
- Authors
Poppo, Laura; Zenger, Todd
- Abstract
Firms' boundary choices have undergone careful examination in recent years, particularly in information services. While transaction cost economics provides a widely tested explanation for boundary choice, more recent theoretical work advances competing knowledge-based and measurement cost explanations. Similar to transaction cost economics, these theories examine the impact of exchange attributes on the performance of markets and hierarchies as institutions of governance. These theories, however, offer alternative attributes to those suggested by transaction cost economics or offer alternative mechanisms through which similar attributes influence make-buy choices. Traditional empirical specifications of make-buy models are unable to comparatively test among these alternative theories. By developing and testing a model of comparative institutional performance rather than institutional choice, we examine the degree of support for these competing explanations of boundary choice. Hypotheses are tested using data on the governance of nine information services at 152 companies. Our results suggest that a theory of the firm and a theory of boundary choice is likely to be complex, requiring integration of transaction cost, knowledge-based, and measurement reasoning.
- Subjects
BUSINESS enterprises; INFORMATION services; TRANSACTION costs; CORPORATE governance; PERFORMANCE evaluation; HIERARCHIES; INDUSTRIAL management; FINANCIAL performance; KNOWLEDGE management
- Publication
Strategic Management Journal (John Wiley & Sons, Inc.) - 1980 to 2009, 1998, Vol 19, Issue 9, p853
- ISSN
0143-2095
- Publication type
Article
- DOI
10.1002/(SICI)1097-0266(199809)19:9<853::AID-SMJ977>3.0.CO;2-B