The Firm as an Institution for Product Design and Value Web Orchestration
Author
Summary, in English
Institutional theory of the firm focuses on firm boundaries and the activities firms internalize within their
hierarchies. However, an examination of disintegrated firms that influences activities beyond the scope of their
hierarchies suggests that firms also perform other economic functions. By analysing these functions, the aim of
this paper is to suggest a theory of the firm that goes beyond internalization. Sometimes firms specialize in the
economic functions of product design and value web orchestration. With large markets, complex and composite
goods and complementarities among producers, firms reap advantages of skill and scale by pooling demand
and realizing complementary positive externalities. Hence, firms are able to make products that customers
never knew they would demand and that suppliers never knew they would be part of supplying, and that is
more efficient than if customers and individual suppliers performed these functions. Case material from Nike,
a large and highly disintegrated firm, illustrates the analysis
hierarchies. However, an examination of disintegrated firms that influences activities beyond the scope of their
hierarchies suggests that firms also perform other economic functions. By analysing these functions, the aim of
this paper is to suggest a theory of the firm that goes beyond internalization. Sometimes firms specialize in the
economic functions of product design and value web orchestration. With large markets, complex and composite
goods and complementarities among producers, firms reap advantages of skill and scale by pooling demand
and realizing complementary positive externalities. Hence, firms are able to make products that customers
never knew they would demand and that suppliers never knew they would be part of supplying, and that is
more efficient than if customers and individual suppliers performed these functions. Case material from Nike,
a large and highly disintegrated firm, illustrates the analysis
Department/s
Publishing year
2013
Language
English
Pages
1-14
Publication/Series
Business and Economics Journal
Volume
4
Issue
BEJ 2013, 4:085
Links
Document type
Journal article
Publisher
OMICS Publishing Group
Topic
- Business Administration
Keywords
- New institutional economics
- comparative institutional analysis
- theory of the firm
- disintegrated brand-name firm
- product design
- value web orchestration
- pooling advantages
- combinatorial benefits.
Status
Published
ISBN/ISSN/Other
- ISSN: 2151-6219