Where do Transactions Come From? A Network Design Perspective on the Theory of the Firm
Keywords
transaction, transaction cost, modularity, encapsulation, information flows, division of cognitive labor, network, network design
Abstract
Our goal in this paper is to explain the location of transactions (and contracts) in a larger system of production. We first characterize the system as a network of tasks and transfers. While transfers between agents are necessary and ubiquitous, the mundane transaction costs of standardizing, counting, valuing and paying for what is transferred make it impossible for all transfers to be transactions. We go on to argue that the modular structure of the network determines its pattern of mundane transaction costs, and thus establishes where cost-effective transactions can be located.
Original Publication Citation
"""Where Do Transactions Come From? A Network Design Perspective on the Theory of the Firm"" (2006). Harvard Business School Working Paper, No. 06-051. (With C.Y. Baldwin)"
BYU ScholarsArchive Citation
Baldwin, Carliss Y. and Clark, Kim B., "Where do Transactions Come From? A Network Design Perspective on the Theory of the Firm" (2006). Faculty Publications. 8914.
https://scholarsarchive.byu.edu/facpub/8914
Document Type
Working Paper
Publication Date
2006
Publisher
Harvard Business School
Language
English
College
Marriott School of Business
Department
Marketing
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