Based on Transaction Cost Theory Vertical Boundary Study

According to transaction cost theory,the enterprise often appears,when its marketplace costs are equal to the harmonization costs.Firm scale in transaction cost means essentially the firm vertical scale or boundary.The firm vertical scale dilation comes true mainly by vertical integration.Though reviewing the vertical integration,we point out the vertical integration can weaken people's opportunism and limited rationality,overcome uncertainty,and reduce business cost.However,it is not a good way for the firm developing.When the firm develops to a certain stage,vertical decomposition is efficiency.The enterprise vertical boundary displays the interactive aspect of dilating and decomposing.