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The Multiple Boundaries of the Firm*
Author(s) -
Araujo Luis,
Dubois Anna,
Gadde LarsErik
Publication year - 2003
Publication title -
journal of management studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 4.398
H-Index - 184
eISSN - 1467-6486
pISSN - 0022-2380
DOI - 10.1111/1467-6486.00379
Subject(s) - incentive , context (archaeology) , industrial organization , business , distribution (mathematics) , vertical integration , boundary (topology) , investment (military) , theory of the firm , economics , microeconomics , political science , mathematics , paleontology , mathematical analysis , politics , law , biology
The notion of firm boundaries has received considerable attention in theories of the firm that address the problems of investment incentives and mitigation of hold‐up problems. In this paper we attempt to develop a different approach to the problem of vertical firm boundaries, based on recent advances in the capabilities view of the firm. Our arguments rely on the pioneering insights of Penrose, Richardson and Loasby to elaborate a view of the boundaries determined by the interaction of the firm's direct and indirect capabilities with other actors. We develop the notion of indirect capabilities to highlight how firm boundaries respond to the distribution of capabilities in the economy as well as the modes of access to complementary and external capabilities. We conclude that the evolution of firm boundaries must be understood in the context of decisions on how the firm relates to other actors in its environment.