Abstract

The theory of the firm addresses the economic choice concerning the coordination of production: direct control by an entrepreneur on the one hand or an open market pricing mechanism on the other. We draw upon design theory to offer new thinking on the choice to integrate economic activities within the boundaries of the firm. By drawing on the scholarship in the field of design studies, we show that the coordination of production could both be created and eliminated by a design. It is a design that specifies the labor and material inputs, thus defining the type and number of factors of production. An important factor is the formality of the design, which influences the potential for its modularization into discrete units of production that can be contracted on the open market. In sum, the article argues that design theory can contribute novel conceptualizations to theory of the firm questions on firm existence, scale, and scope.

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