Reassessing the fundamentals and beyond: Ronald Coase, the transaction cost and resource‐based theories of the firm and the institutional structure of production

TLDR

Coase anticipated many questions now central to the resource‑based view, and his work suggests that resource‑based theory is crucial for explaining the institutional structure of production and informing strategy research. The paper argues that a triangular alignment of governance structure, transaction, and resource attributes, together with sensitivity to interdependence between production and exchange, is essential for a complete understanding of economic organization. The authors apply this framework to interfirm collaboration, expanding the focus from cost alone to include skills/knowledge and their interdependence with cost in determining firm boundaries. They find that the triangular alignment shows how a firm's identity and strategy shape resource interactions and governance choices, and that this broader focus reveals the transacting process as a productive activity that drives co‑evolution of partner competencies. © 2002 John Wiley & Sons, Ltd.

Abstract

Abstract In this paper, three points are argued. The first is that Ronald Coase, best known as the forefather of transaction cost theory, foresaw many of the critical questions that proponents of the resource‐based view are concerned with today. The second is that resource‐based theory plays a potentially much more critical role in economic theory and in explaining the institutional structure of production than even many resource‐based scholars recognize. The last point is that a more complete understanding of the organization of economic activity requires a greater sensitivity to the interdependence of production and exchange relations. The arguments presented in this paper highlight important, but relatively ignored, elements in Coase's work that inform strategy research. More importantly, this paper makes the case for a triangular alignment between the triumvirate of governance structure, transaction, and resource attributes and demonstrates how the identity and strategy of a particular firm influences how its resources interact with the transaction and how the firm chooses to govern it. The general argument is then applied to the context of interfirm collaborative relations, where the key focus is broadened from just cost to also include skills/knowledge and the interdependence between cost and skills with respect to firm boundaries, both in terms of choice and nature. Such a broadening of focus enables us to additionally examine the transacting process as a productive endeavor, which underpins the co‐evolution of the competencies of partner firms. Copyright © 2002 John Wiley & Sons, Ltd.