Adaptation, Specialization, and the Theory of the Firm

Birger Wernerfelt is the J. C. Penney Professor of Management at the Sloan School of Management, Massachusetts Institute of Technology.

Preface; Part I. Agenda: 1. Introduction; 2. Preview: small forces, high frequencies, and large firms; Part II. The Main Argument: 3. Adaptation costs in one dimension: firms, contracts, and price lists; 4. Adaptation costs in three dimensions: firms, markets, and contracts; 5. All adaptations are not the same: the scope of firms and the size of markets; 6. Resources and the scope of the firm; Part III. Implications: 7. The allocation of asset ownership; 8. Communication within and between firms; 9. The power of incentives within and between firms; 10. Decision-making in large organizations; Part IV. Empirical Tests: 11. Bargaining costs: existence and sub-additivity; 12. Adaptation frequency and the boundary of the firm; 13. Asset ownership and externalities; Part V. Foundations: 14. Endogenously incomplete contracts; 15. Multiple equilibria and firm heterogeneity; 16. On the endogenous amplification of small differences; Part VI. Postscript: 17. Summary and final reflections; Index.