Division Of Labor, Markets And Corporate Boundaries Dynamic Evolution

The boundary of firm is one of focuses of the theory of the firm. Transaction cost is the sole marginal criterion of firm boundary in New Institution Economics, but in Classical Economics, the most important headspring of economic development is labor division and specialization. Our observations of historical development of labor division, market and firm confirm that both of transaction cost and advantages of the division are the key factors of the change of organizations' coordination mechanism. The main conclusion is that both of market and firm or other production organization forms are the mechanisms of labor division and coordination. The paper also agues that how technique, capital scale and market size affect the choice of coordination mechanism and the changes of firm's boundary.