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Two-way Communication Costs and the Boundaries of the Firm

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Author Info
Nigel Wadeson

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Abstract

Casson and Wadeson (International Journal of the Economics of Business, 1998, 5, pp. 5-27) have modelled the dialogue, or conversation, which customers have with their suppliers in order to convey their requirements, while taking production implications into account. They showed that this has important implications for the positioning of the boundaries of the firm. Unfortunately, their model has the restriction that communication is only costly in the direction of customer to supplier. This paper extends their model by introducing two-way communication costs. It shows that the level of communication cost in the direction of supplier to customer is a key additional factor in determining the nature of the dialogue that takes place. It also shows that this has important additional implications for the positioning of the boundaries of the firm. Custom computer software development is used as an example of an application of the theory.

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Publisher Info
Article provided by Taylor and Francis Journals in its journal International Journal of the Economics of Business.

Volume (Year): 6 (1999)
Issue (Month): 3 (November)
Pages: 301-329
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Handle: RePEc:taf:ijecbs:v:6:y:1999:i:3:p:301-329

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Related research
Keywords: Communication; Firm; Information; Complexity; Product Development;

References listed on IDEAS
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  1. Carter, Martin J, 1995. "Information and the Division of Labour: Implications for the Firm's Choice of Organisation," Economic Journal, Royal Economic Society, vol. 105(429), pages 385-97, March. [Downloadable!] (restricted)
  2. Kofman, Fred & Ratliff, James D., 1996. "Monolog vs. dialog in costly bilateral communication," Journal of Economic Behavior & Organization, Elsevier, vol. 31(3), pages 431-443, December. [Downloadable!] (restricted)
  3. Mark Casson Nigel W Adeson, 1998. "Communication Costs and the Boundaries of the Firm," International Journal of the Economics of Business, Taylor and Francis Journals, vol. 5(1), pages 5-27, February. [Downloadable!] (restricted)
  4. Bidault, Francis & Despres, Charles & Butler, Christina, 1998. "The drivers of cooperation between buyers and suppliers for product innovation," Research Policy, Elsevier, vol. 26(7-8), pages 719-732, April. [Downloadable!] (restricted)
  5. Liker, Jeffrey K. & Kamath, Rajan R. & Nazli Wasti, S. & Nagamachi, Mitsuo, 1996. "Supplier involvement in automotive component design: are there really large US Japan differences?," Research Policy, Elsevier, vol. 25(1), pages 59-89, January. [Downloadable!] (restricted)
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