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date: 25 July 2021

Abstract and Keywords

Extant explanations of the nature and scope of firms, such as transaction costs, property rights, metering, and “resources,” can be integrated into a more general capability-based theory of the nature and essence of the firm that recognizes the importance to the firm of creating and capturing value from innovation. The appropriability of returns from creative and innovative activity often requires the entrepreneurial creation and co-creation of markets and business ecosystems. Accordingly, market failure and transaction costs approaches need to be revamped to capture the essence of entrepreneurial and managerial activity that extends beyond the mere exercise of authority within existing firms and markets.

Keywords: capability-based theory of the firm, creating value from innovation, appropriability of returns, market creation, entrepreneurial

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