2004•Revue économiqueRequires access
The Firm Boundary Problem
Bernard Baudry
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Abstract
Going back to the initial question raised by Coase in his 1937 article, we discuss in this paper the firm boundary problem by analyzing a specific organizational form, the network-firm. We first focus on the functioning of the network-firm, taking a specific interest in the incentive and coordination devices it has to offer. We then show how the functioning mechanism of the network-firm challenges certain insights gained from transaction-cost and incomplete contracts theory, namely the impact ownership can have on investment incentives. Finally, regarding the organization of production, we show that the network-firm must be considered as a specific organizational form, distinct both from the market and from the firm.