... their own products? This essentially leads to the central question; why cannot a large firm (or centrally planned economy) always operate at least as efficiently as an unorganised, chaotic market? Knight (1971) proposed that financial constraints of a founder could restrict the growth of entrepreneurial firms and that the free rider problem could restrict the growth of partnerships. However, for large publicly listed firms he could only speculate that motivational issues involving staff was the reason for restriction of growth and to properly assess this as a reason assumes that such firms have no access to market like incentives packages. Coase (1937) was the first economist to look at firms in terms of what functions they did internally and which they sub contracted. He believed that there were different costs associated with activities done within the firm and done in the market. Transactions in the market have negotiation and price calculating ...

See this essay or coursework document in full right now