Operating Principle
2–4 min read
Coase’s question of why firms exist is answered through transaction costs: search, contracting, monitoring, and enforcement can cost more than internal performance. Make-versus-buy should follow this logic, not control instinct.
Operating Question
Why It Matters
A firm should internalize activity only when in-house costs less than external transacting.
Supporting Evidence
Ronald Coase; Oliver Williamson.
Research Notes
Treat as an operating heuristic and assess the applicable context, limits, and counterarguments.
Practical Actions
Calculate market coordination cost; weigh hold-up risk; revisit control-driven integrations.
Continue Reading