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Firm-Specific Learning and the Nature of the Firm. Why Transaction Costs May Provide an Incomplete Explanation

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  • Geoffrey M. Hodgson
  • Thorbjørn Knudsen

Abstract

This article discusses the limits of a purely transaction cost explanation of the existence of the firm by pointing to additional factors. A simple heuristic model shows that firm-specific learning effects can overcome the costs of monitoring employees, and explain the existence of the firm even in the absence of transaction costs related to the market mode of organisation. Comparing the relative importance of transaction cost and capabilities explanations for the existence of the firm, there is no a priori reason to assume the supremacy of one type of explanation over the other. We argue that a conjoint research program, encompassing both transaction costs and capabilities, must be developed and tested empirically.

Suggested Citation

  • Geoffrey M. Hodgson & Thorbjørn Knudsen, 2007. "Firm-Specific Learning and the Nature of the Firm. Why Transaction Costs May Provide an Incomplete Explanation," Revue économique, Presses de Sciences-Po, vol. 58(2), pages 331-350.
  • Handle: RePEc:cai:recosp:reco_582_0331
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    References listed on IDEAS

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    1. Matthieu Solignac & Maxime To, 2016. "Le niveau de chômage dans le voisinage affecte-t-il l’entrée sur le marché du travail ?," Revue économique, Presses de Sciences-Po, vol. 67(3), pages 495-524.
    2. Étienne Wasmer, 2016. "Des politiques urbaines nationales : un oxymore ?," Revue économique, Presses de Sciences-Po, vol. 67(3), pages 667-678.
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    Cited by:

    1. Peter G. Klein & Michael E. Sykuta (ed.), 2010. "The Elgar Companion to Transaction Cost Economics," Books, Edward Elgar Publishing, number 4136, April.
    2. Vitor Braga, 2004. "Business networking for SMEs as a means to promote regional competitiveness: A Theoretical Framework," ERSA conference papers ersa04p455, European Regional Science Association.
    3. Cécile Cezanne & Laurence Saglietto, 2016. "Human Capital-Intensive Firms and 4PLs: A Specific Partnership," Journal of Economics and Management, College of Business, Feng Chia University, Taiwan, vol. 12(1), pages 61-83, February.
    4. Cordes, Christian & Richerson, Peter J. & McElreath, Richard & Strimling, Pontus, 2008. "A naturalistic approach to the theory of the firm: The role of cooperation and cultural evolution," Journal of Economic Behavior & Organization, Elsevier, vol. 68(1), pages 125-139, October.
    5. Geoffrey M. Hodgson, 2010. "Limits of Transaction Cost Analysis," Chapters,in: The Elgar Companion to Transaction Cost Economics, chapter 28 Edward Elgar Publishing.

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