In recent years, it has become increasingly apparent that some of the key teachings of classic economic theory do not fit today’s business environment. Though firms try to follow economic logic, the nature of innovation strains their capacity to do so. From the inadequacy of classic economic theory to explain the constraints acting on firms, New Institutional Economics (NIE) was born. Combining several approaches, including property rights, transaction cost economics (TCE), evolutionary reasoning, the contractual nature of the firm, and allocation of common resource pools, NIE offers a new approach for understanding firm behaviour. Given bounded rationality, information impactedness and the tacit nature of knowledge, innovation is a tricky task. How firms overcome these problems and bring new products to market can be best understood comparatively, using the NIE framework. Professors Erin Anderson and Hubert Gatignon present their ideas in this new Working Paper.
Authors: Erin Anderson, Hubert Gatignon
Source: INSEAD Knowledge
Subjects: Economics, Marketing / Sales
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old URL: http://knowledge.insead.edu/article.cfm?id=598&uncat=12 old Title: Firms and the Creation of New Markets