Technology, Knowledge and the Firm
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Technology, Knowledge and the Firm

Implications for Strategy and Industrial Change

Edited by Ken Green, Marcela Miozzo and Paul Dewick

There is a long-standing tradition of research that highlights the importance of differences in the organizational and technological capabilities of firms and their effect on economic performance. This book expands on this theme by exploring the role of knowledge and innovation in firm strategy and industrial change. Underlying the volume is the belief that firms have distinctive methods of operation and that these processes have a strong element of continuity.
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Chapter 2: The Economics of Governance: The Role of Localized Knowledge in the Interdependence Among Transaction, Coordination and Production

Cristiano Antonelli


Cristiano Antonelli 1. INTRODUCTION Transaction costs economics has made possible significant progress in the economic analysis of the firm. The continual process of implementation and redefinition of the original framework put forward by Ronald Coase and Oliver Williamson and the contributions of the resource-based theory of the firm have paved the way to a broader approach: the economics of governance. In transaction costs economics the firm is viewed as a bundle of activities selected according to the relative costs of transaction and coordination. Internalization is decided when the costs of using the markets are higher than the costs of coordinating production internally. The basic choice is whether to buy a given component or other intermediary inputs or to make them. The decision is taken in a static context where coordination and transaction costs are given and depend upon exogenous factors. The role of competence and knowledge is not considered. An alternative view of the firm has been elaborated by the resource-based theory of the firm. The resource-based theory of the firm has emerged as a consistent body of literature centred upon the key role of the firm in the accumulation and generation of technological knowledge and competence and its transformation into technological and organizational innovations (Foss, 1997; Penrose, 1959). In the resource-based theory of the firm little attention is paid to understanding the role of coordination costs in limiting the size of the firm and to the constraints and opportunities of the marketplace as an alternative mechanism of...

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