The boundaries of the firm: the theories of Coase, Knight and Weitzman

Boundaries are of the utmost importance because they establish size and shape. In so far as changes in the law affect the elements making up the boundaries of the firm, such changes can be expected to have an impact on the size and structure of firms. Theories which are capable of explaining how operations within the firm are different from those outside can be used to draw the boundaries of the firm and so to define its essence or nature. In this article three theories which give substance to the boundaries of the firm are presented and analysed.