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Towards A Transaction Cost Analysis Of The Hub Firm

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Executive Summary

New Institutional Economics explain the firm as a hierarchical form of coordination that internalizes market exchanges. But important industries are today often dominated by highly disintegrated firms that keep few activities within the scope of their own hierarchies. These firms, in the business literature called "Hub firms" that orchestrates "Strategic networks", play a key role in the value chains in which they operate. They control and coordinate downstream and upstream activities performed by other firms and do not fit into an explanation of the firm as an institution that internalizes markets by the use of hierarchical coordination mechanisms.

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