Abstract

"Market Frictions, Governance and Economic Rents: Taking Stock and Looking Ahead"

Joseph T. Mahoney and Lihong Qian

First Author :

Joseph T. Mahoney
Business Administration
University of Illinois at Urbana-Champaign, College of Business
1206 S. Sixth Street
140C Wohlers Hall, MC 706
Champaign, IL 61820
USA

josephm@illinois.edu

http://www.business.uiuc.edu/faculty/mahoney.html

Second Author :

Lihong Qian
Business Administration
University of Illinois at Urbana-Champaign, College of Business
1206 S. Sixth Street
350 Wohlers Hall, MC 706
Champaign, IL 61820
USA

812-391-0206

lqian3@illinois.edu

Abstract :

This paper develops a more unified organizational economics theory within Strategy. We begin with perfectly competitive markets derived from the first fundamental welfare theorem of economics, and develop a parsimonious typology of market frictions. We show how two primary questions in Strategy -- why firms exist and why some firms outperform others -- can be evaluated from this market frictions logic. Building on this logic enables more systematic explanations and predictions concerning governance structures and economic rents in Strategy research.

Keywords :

Market frictions; organizational economics; transaction costs theory; resource-based approach

Manuscript Received : 2009

Manuscript Published : 2009

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