The article argues that firms emerge because they are better equipped to deal with the transaction costs inherent in production and exchange than individuals are. Economists such as Oliver Williamson, Douglass North, Oliver Hart, Bengt Holmström, Arman Alchian and Harold Demsetz expanded on Coase's work on firms, transaction costs and contracts. Economists and political scientists have used insights from Coase's work to explain the functioning of organizations in general, not just firms. Coase's work strongly influenced the New Economics of Organization (New Institutional Economics).
The article argues that firms emerge because they are better equipped to deal with the transaction costs inherent in production and exchange than individuals are. Economists such as Oliver Williamson, Douglass North, Oliver Hart, Bengt Holmström Arman Alchian and Harold Dems,etz expanded on Coase's work on firms, transaction costs and contracts. Economists and political scientists have used insights from Coase's work to explain the functioning of organizations in general, not just firms. Coase's work strongly influenced the New Economics of Organization (New Institutional Economics).