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Background Note
| HBS Case Collection
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1995
(Revised from original version)
Scope of the Corporation, The
by
David J. Collis
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Abstract
Describes analyses that determine the appropriate limit to the scope of the firm. Examines both the production cost justification for firm diversification--economies of scope and shared resources, and the governance cost justification for including transactions inside the hierarchy rather than contracting for them on the market--transaction costs and agency theory. Concludes by identifying the line between corporate strategy and firm scope.
Keywords: Cost;
Agency Theory;
Corporate Strategy;
Diversification;
Expansion;
Citation:
Collis, David J. "Scope of the Corporation, The." Harvard Business School Background Note 795-139, April 1995. (Revised from original March 1995 version.)