Two major advances in the theory of the firm and (micro)economics more generally are arguably transaction costs economics (TCE) and the theory of firm resources. TCE has originally been applied to the theory of the firm, but found applications in virtually all fields of economic inquiry. The theory of firm resources currently spans much of the industrial organisation (IO) and strategic management literature. In some fields, e.g. diversification, it has already acquired dominant status. Despite significant progress in TCE there still seem to remain significant unresolved issues. Indeed we claim that transaction cost economics fail to supply convincing answers to the issues of the nature of the firm (why do firms exist?), and their essence (running a business). It offers a partial explanation of the “nature” and little on the “essence”. The resource value view complements the nature side and goes far beyond on the essence issue. It provides a fruitful starting point for an integrative framework. This, we suggest, should be based on the resource value perspective story and craft (dynamic) transaction costs in the ensuing evolutionary tale.
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