Why do firms do some activities “in house” and contract out others? British-American economist Ronald Coase gave a cogent explanation in a classic 1937 paper on the nature of the firm. Show host Gene Tunny explains to his colleague Tim Hughes how Coase’s insights (e.g. the concept of transaction costs) can be applied to understand the actions of an Australian construction firm Hutchinson’s deciding to employ people to do concrete formwork rather than relying on subcontractors.
Why do firms do some activities “in house” and contract out others? British-American economist Ronald Coase gave a cogent explanation in a classic 1937 paper on the nature of the firm. Show host Gene Tunny explains to his colleague Tim Hughes how Coase’s insights (e.g. the concept of transaction costs) can be applied to understand the actions of an Australian construction firm Hutchinson’s deciding to employ people to do concrete formwork rather than relying on subcontractors.
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Courier-Mail article on Hutchinson’s decision to do its own formwork:
Ronald Coase’s classic article on the nature of the firm:
https://onlinelibrary.wiley.com/doi/full/10.1111/j.1468-0335.1937.tb00002.x
American Express article on pros and cons of hiring versus outsourcing:
Thanks to Obsidian Productions for mixing the episode and to the show’s sponsor, Gene’s consultancy business www.adepteconomics.com.au.
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