- Consulting Editors
- The Oxford Handbook of Managerial Economics
- Managerial Economics: Introduction and Overview
- Managerial Economics: Present And Future
- Market Power: How Does it Arise? How is it Measured?
- Advances in Cost Frontier Analysis of the Firm
- Supply Chain Design for Managing Disruptive Risks
- Combinatorial Auctions
- Game and Information Theory in Modern Managerial Economics
- Issues in the Analysis of Time, Risk, and Uncertainty
- Behavioral Economics and Strategic Decision Making
- Advances in Pricing Strategies and Tactics
- Product Distribution and Promotion: An Analytical Marketing Perspective
- Market Imperfections and Sustainable Competitive Advantage
- The New Managerial Economics of Firm Growth: The Role of Intangible Assets and Capabilities
- Strategies for Network Industries
- Internalization Theory as the General Theory of International Strategic Management Past, Present and Future
- Competitive Strategy in the Nonprofit Sector
- Organizational Design and Firm Performance
- Design and Implementation of Pay for Performance
- Vertical Merger
- The Evolving Modern Theory of the Firm
- Financing the Business Firm
- Corporate Governance and Firm Performance
- Managing Workplace Safety and Health
- Merger Strategies And Antitrust Concerns
- On the Profitability of Corporate Environmentalism
- Name Index
- Subject Index
Abstract and Keywords
This chapter examines the role played by firms in allocating resources in a modern economy, explaining when firms are superior to markets and the limits to firm size. The analysis begins by carefully examining what distinguishes firm allocation from markets. We then review the various theoretical approaches to determining the size of firms and the types of transactions that occur within firms versus within markets. These models can be grouped into four broad categories: transaction cost models, property rights models, adaptation models, and incentive system models. We review the distinctive predictions of these models regarding the size and scope of firms, and numerous empirical tests. We discuss these tests, their results and limitation, and current research challenges. We conclude with a discussion of directions for future research.
Robert Maness is the Vice President at Charles River Associates and a Visiting Associate Professor in the Department of Economics at Texas A&M University.
Steven N. Wiggins is a Professor of Economics at Texas A&M University.
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