One of our assigned readings for class was focused Ronald Coase’s ideas on when firms form and why. It was fascinating to read about this, and I learned a lot. According to our reading, Coase believed that, “firms will arise when they can arrange to produce what they need internally and somehow avoid these costs [of using the market].”
As I read about Coase and his ideas about firms, I started to think about construction companies and contractors. My family is currently remodeling our home. It is interesting to see how the contractor and company that we chose to use work choose to work with other people, both people who are within and outside of their company. I agree with Coase that there times when it is in the best interest of the company to hire and there are other times when it is in the company’s best interest to contract out the work.
According to another source, but along the same lines, “the object of a business organization is to reproduce the conditions of a competitive market for the factors of production within the firm at a lower cost than the actual market.”
I think that this is an intriguing concept. I am excited to discuss it in class.
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