Are Capabilities-Based Theories of Firm Boundaries Really Distinct from Transaction Cost Theory?
Nicholas Argyres Todd Zenger 2007 Strategy & Policy A large literature has developed over the past 10 years or so that attempts to compare transaction cost and capabilities explanations of firms’ vertical boundaries. Much of this literature has treated comparative capabilities (buyers’ vs. potential suppliers’) as determinants that are independent of transaction costs, based on the idea that capabilities theories of the firm are distinct from the transaction cost theory of the firm. In this commentary, we argue that this approach is mistaken. We argue that capabilities and transaction cost determinants interact with other dynamically, and that the two theories of the firm cannot be conceptually distinguished. Our argument carries implications for theories of the firm, and for empirical research aimed at testing those theories.
