The Nature of the Firm
· Economica lists an issue month but no publication day; 15 November is used as a neutral sorting date.
Summary
Coase asks why firms exist when markets can coordinate production through prices. His answer is that using markets has costs—including discovering prices and negotiating contracts—so transactions move inside firms until the cost of internal organization outweighs the cost of market exchange.
Why it matters
AI can change both sides of that boundary. Agents may make search, contracting, monitoring, and market coordination cheaper, while internal AI systems may also reduce managerial costs; which effect is stronger can influence what firms make, buy, and delegate.
What to keep in mind
The 1937 paper is a theory of industrial organization, not a prediction about digital firms or AI agents. Its mechanism does not imply that firms must shrink, because technology can lower internal coordination costs as well as external transaction costs.