ABSTRACT
In this book, we have concentrated on the ways in which two important sets of institutions-firms and markets-affect and are affected by economic change. Our primary concern has been to show how the boundary between firms and markets shifts over time depending on changes in their respective environments. Of particular importance in locating this boundary are relative production and transaction costs, which in turn are largely functions of knowledge. Firms possess groups of capabilities, which allow them to undertake activities efficiently. In many cases, capabilities that are bound together institutionally, as in a firm, are synergistic in the sense that they can accomplish more when combined than the individual capabilities can when used separately. Moreover, some capabilities are imitable while others are not, and some capabilities are contestable while others are idiosyncratic.
