Working Paper Series
The Firm as a Pool of Factor Complementarities
() and Dennis J. Snower
Abstract: This paper presents a new approach to the theory of the
firm by identifying factor complementarities as central to the
determination of the firm's boundaries. The factor complementarities may
take a variety of forms: technological and informational complementarities,
as well as economies of scale and scope. We examine the tradeoff between
the gains from these complementarities and transactions costs. In so doing,
we must abandon the standard dichotomy between the determinants of plant
size and firm size. The influence of factor complementarities on firm size
is examined in partial and general equilibrium frameworks.
Keywords: Boundary of Firm; Complementarities of Production; Transaction Costs; (follow links to similar papers)
JEL-Codes: D20; D40; D80; (follow links to similar papers)
15 pages, June 10, 2003
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