A CAPABILITY THEORY OF THE LIMITS OF FIRM SCALE AND SCOPE

Strategy & Business Policy

Speaker: Connie Helfat

Professor - Dartmouth

Conference  Jouy-en-Josas - S210

ABSTRACT:

 What determines the limits of the scale and scope of the firm relative to the market? The theory of the firm has traditionally explained the boundary of the firm using some type of incomplete contracting approach. I first briefly summarize the answers provided by Coase and by the most prominent incomplete contracting theories of transaction costs and property rights. Then I summarize the answers provided by prior research in strategic management from a knowledge-based and  capability perspective. I build on this research in an effort to craft, based on the first principles of organizational routines, a capability-based explanation of the limits of firm scale and scope.