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IZA
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The Firm as a Pool of Factor Complementarities
by
Assar Lindbeck, Dennis J. Snower
(October 2003)
Abstract:
This paper presents a new approach to the theory of the firm by identifying factor
complementarities as central to the determination of the firm’s boundaries. The factor
complementarities may take a variety of forms: technological and informational
complementarities, as well as economies of scale and scope. We examine the tradeoff
between the gains from these complementarities and transactions costs. In so doing, we
must abandon the standard dichotomy between the determinants of plant size and firm size.
The influence of factor complementarities on firm size is examined in partial and general
equilibrium frameworks.
Text: See Discussion Paper No. 882 
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