Visible Hands: Governance of Value Creation—Within Firms and Beyond

Abstract

Economic transactions can be divided into (1) those that are priced versus (2) those that are governed by visible hands, and within the latter (2a) those within a single organization versus (2b) those in nonintegrated settings. Nonintegration is not always “the market” [i.e., (1)]. The conventional distinction between markets versus firms, (1) versus (2a), is misleading. The fundamental distinction is between transactions that are priced versus those that are governed, (1) versus (2). Unifying (2a) with (2b) highlights their commonalities and suggests directions for future research, especially the problem of building (not selecting) an equilibrium.