The Times and the Theory
In 1937, Ronald Coase, then a young 27-year-old lecturer at the London School of Economics, had posed a provocative puzzle. When should a firm outsource an intermediate factor of production, and when should it produce the good or service in-house? This relatively simple question spawned the first academically rigorous explanation for the modern corporation and provided a theoretical explanation for the valuation of a corporation that is in excess of its book value of assets.
KeywordsCorporate Governance Transaction Cost Vertical Integration Transaction Cost Economic Neoclassical Model
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