Abstract
This article extends Bylund’s theory of the firm by considering how internalization results not only in the combination of assets required for entrepreneurial innovation but also in the merging of the data streams they generate into a unified view. I argue that because data is not generally amenable to aggregation through market transactions, economies of scale in analysis imply that the informational resources required for the efficient use of local knowledge will typically only be available within the firm, which will have access to insights that would be unavailable to a collection of individuals each controlling only a subset of its physical and human capital resources. The firm may thus be viewed as an institution for facilitating observation that supersedes the individual transactor as the essential market participant. A further implication is that advances in information technology have the potential to expand optimal firm boundaries and extend firm longevity by increasing the firm’s ability to derive information from the signals observed by its members.
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DeWeaver, M.A. The Firm as Observer: Data Resources and Firm Longevity in Bylund’s Austrian Theory of the Firm. Rev Austrian Econ 37, 81–93 (2024). https://doi.org/10.1007/s11138-021-00567-4
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DOI: https://doi.org/10.1007/s11138-021-00567-4