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Reference no. 9-795-139
Published by: Harvard Business Publishing
Originally published in: 1995
Version: 20 April 1995

Abstract

Describes analyses that determine the appropriate limit to the scope of the firm. Examines both the production cost justification for firm diversification - economies of scope and shared resources, and the governance cost justification for including transactions inside the hierarchy rather than contracting for them on the market - transaction costs and agency theory. Concludes by identifying the line between corporate strategy and firm scope.

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Abstract

Describes analyses that determine the appropriate limit to the scope of the firm. Examines both the production cost justification for firm diversification - economies of scope and shared resources, and the governance cost justification for including transactions inside the hierarchy rather than contracting for them on the market - transaction costs and agency theory. Concludes by identifying the line between corporate strategy and firm scope.

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