A dual theory of the firm between transactions and competences

The existence of two alternative visions of the firm (the firm as a "processor of information" versus the firm a "processor of knowledge") raises some fundamental theoretical questions. As Langlois and Foss (1996) have pointed out, we are confronted with the choice between, on the one side, a contractual approach based on transaction costs, where ‘firms and other institutions are alternative bundles of contracts understood as mechanisms for creating and realigning incentives’, and, on the other side, ‘a qualitative co-ordination, that is helping co-operating parties to align not their incentives but their knowledge and expectations’.