Asia-Pacific Journal of Business (아태비즈니스연구)

KNU The Institute of Management & Economy Research (강원대학교 경영경제연구소)
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A Comparison of Three Theories of Firm Boundaries

기업경계에 관한 세 이론의 비교

  • Received : 2021.08.31
  • Accepted : 2021.09.21
  • Published : 2021.09.30
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Abstract

Purpose - In this study, I attempt to clarify three theories of firm boundaries (vertical integration): the principal-agent theory, transaction cost theory, and property rights theory. Although these theories have been widely cited and much discussed, it has been found that understanding the commonalities and distinctions of these seemingly familiar theories is difficult. Design/methodology/approach - I present the three theories about the decisions that firms make concerning their boundaries. Then, I compare elemental versions of the theories of the firm. Findings - Comparing the ingredients of the elemental property rights and principal-agent theories shows that they provide a unified account of the costs and benefits of vertical integration. However, the property rights theory in no sense formalizes the transaction cost theory. Research implications or Originality - Clarifying the three theories of the firm can help to construct empirical models and interpret its results.

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